The Federal Trade Commission announced today that Countrywide Financial, now owned by Bank of America, will pay $108 million to settle charges that it collected excessive fees from homeowners struggling to pay their mortgages. The settlement represents the largest for the FTC in a mortgage servicing case. The money will be used to reimburse homeowners who had their loans serviced by Countrywide prior to Bank of America buying the company in July 2008.
The FTC alleged that Countrywide charged homeowners who had fallen behind on their monthly payments inflated fees that added up to thousands of dollars. Those fees were ordered by Countrywide for things such as property inspections or lawn mowing to secure the homes in case the borrower defaulted. The suit said that Countrywide created subsidiaries to provide these services instead of using third-party vendors, and then marked up the fees that homeowners would pay, sometimes by as much as 100 percent.
“Life is hard enough for homeowners who are having trouble paying their mortgage," said FTC Chairman Jon Leibowitz. "To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible."
The FTC also said that Countrywide did not tell borrowers in bankruptcy about the amounts owed or that fees had been added. The Commission alleged that the fees were a way for Countrywide to increase profits even as the economy soured and an increasing number of homeowners with subprime mortgages issued by Countrywide defaulted.
More Subpoenas for Goldman Sachs
Last week it was Warren Buffett, this week it’s Goldman Sachs.
The congressionally appointed committee investigating the causes of the economic crisis revealed it subpoenaed the bank for failing to comply with requests for documents and interviews. The bipartisan Financial Crisis Inquiry Commission has held a series of hearings, including one in New York City last week where Warren Buffett testified under subpoena about the role of credit ratings firms. Buffett is a large shareholder in Moody’s, a ratings firm.
Goldman’s CEO Lloyd Blankfein testified at the first hearing held by the Commission in January of this year.
In a statement announcing the subpoena, the Commission said that “Failure to comply with a Commission request is viewed with the utmost seriousness, as the Commission will not be deterred from getting desired information."
“We have been and continue to be committed to providing the FCIC with the information they have requested,” said Samuel Robinson, a spokesman for Goldman Sachs.
In recent weeks, the Securities and Exchange Commission filed a civil suit against the bank, alleging fraud in how the bank structured and then sold securities backed by residential mortgages. The bank also received a subpoena from the New York Attorney General Andrew Cuomo whose office is investigating whether Goldman along with seven other Wall Street firms misled rating agencies in order to receive better reviews of mortgage-backed securities.