Bank of America agreed on Monday to repay $108 million to 200,000 struggling homeowners who were overcharged fees by Countrywide mortgage services companies prior to 2008. Bank of America acquired Countrywide in July 2008.
According to a complaint filed by the Federal Trade Commission, Countrywide created subsidiaries that it used to collect excessive fees from homeowners who had fallen behind with their payments -- sometimes marking up charges for inspections, landscaping and other services meant to protect the value of the homes by 100%.
Countrywide is also accused of not informing homeowners who had filed bankruptcy to save their homes that hundreds or thousands of dollars in additional fees and escrow charges had been added to their mortgages. Once the bankruptcy cases were completed, Countrywide would attempt to collect the additional charges, even if it meant forcing homeowners into foreclosure. As many as 200,000 borrowers were affected.
By setting up subsidiaries to handle services that were needed as millions of homeowners fell victim to the housing crisis, Countrywide was able to increase its revenues substantially by essentially paying itself to administer default-related services to the customers it had sold sub-prime loans to.
"To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible," said FTC Chairman Jon Leibowitz in a press release.
The settlement requires Countrywide to pay $108 million, which will be refunded to the homeowners Countrywide overcharged before July 2008.
What's your investing game plan?View Course »