Former mortgage lending giant Countrywide has been ordered by the FTC to pay out $108 million in refunds to homeowners who were overcharged by the company’s servicing division.
After borrowers fell behind on mortgage payments (mind you from terrible mortgage programs like the infamous option arm), Countrywide’s loan servicing operation began overcharging homeowners for things like property inspections, lawn mowing, and other services meant to protect their financial interest in the properties.
But instead of hiring third-party vendors to perform the services, the mortgage lender created subsidiaries to hire the vendors so it could mark up the fees, often by 100 percent.
The FTC claims the move was part of Countrywide’s strategy to increase profits from default-related service fees as the mortgage market began to take a dive.
Additionally, while servicing the loans of those facing Chapter 13 bankruptcy, Countrywide allegedly made “false or unsupported claims to borrowers about amounts owed or the status of their loans,” and didn’t notify borrowers when new fees and escrow charges were added to their loan balances.
The FTC’s complaint and settlement names Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP, as defendants.
The settlement money will be refunded to homeowners who Countrywide overcharged before July 2008, prior to their acquisition by Bank of America.
Countrywide was ranked as the largest mortgage servicer in the United States in early 2008, with a balance of more than $1.4 trillion in its servicing portfolio.