In the agency’s complaint, filed Monday in the Central District of California, the FTC alleged that Countrywide profited from homeowners who defaulted or fell behind on their payments by charging them excessively high fees for services like lawn mowing and inspections designed to protect the lender’s interest in the property. According to the FTC, Countrywide created subsidiaries to hire vendors to perform those services, marked up the prices, and then charged homeowners the marked-up fees. The complaint also alleges that Countrywide misled borrowers about the amounts they owed or the status of their loans.
“Life is hard enough for homeowners who are having trouble paying their mortgage,” said FTC chairman Jon Leibowitz in a statement. “To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible. We’re very pleased that homeowners will be reimbursed as a result of our settlement.”
Bank of America, which bought Countrywide in 2008, said in a statement that it agreed to the settlement–in which it did not admit to any wrongdoing–to “avoid the expense and distraction associated with litigating the case.” It also noted that the FTC investigation was underway before it acquired Countrywide.
In addition to the $108 million refund to homeowners, Bank of America, which was represented by King & Spalding, agreed in a consent and judgment order to new disclosures and guidelines regarding the fees charged to borrowers. The settlement also requires Bank of America to disclose to borrowers the use of affiliates for default-related services and to state the fees involved.