Bank of America Corp. has agreed to pay the Federal Trade Commission $108 million to cover foreclosure-related servicing abuses by Countrywide Home Loans, the mega lender/servicer that it bought almost two years ago.
Overall, the settlement will benefit more than 200,000 consumers who were charged excessive fees while facing foreclosure or trying to save their homes from bankruptcy, the FTC said on Monday.
Countrywide profited from failed loans and "illegally extracted the last dollar out [of] the pockets of the most desperate consumers," FTC Chairman Jon Leibowitz said in announcing one of the largest settlements in FTC history. "To have a major servicer like Countrywide piling on illegal and excessive fees is indefensible."
B of A bought Countrywide Financial Corp., the parent of CHL, in August 2008 and "took responsibility for fixing the problems," Leibowitz said. "Bank of America did step up to the plate."
The FTC worked with bankruptcy trustees to investigate allegations that CHL made inaccurate claims to the courts on the amounts customers owed.
"Countrywide's outdated computer systems made the records incredibility difficult to sort out. But we believe thousands of borrowers in bankruptcy ended up overpaying," the FTC chairman said. He also noted that Countrywide used affiliates to provide default services such as property inspections and lawn mowing, charging excessive fees for them.
"Countrywide's mortgage contracts prohibited these inflated charges, but that didn't stop Countrywide from passing on those markups in violation of the FTC Act," Leibowitz said. Bank of America said that, in settling, it did not admit wrongdoing.
"Bank of America agreed to this settlement to avoid the expense and distraction associated with litigating the case," the company said in a statement. "In addition to addressing FTC claims regarding affiliated default-related services, it provides resolution of several litigations by U.S. bankruptcy trustees. The settlement allows us to put all of these matters behind us."