Lost in the news of the manufactured debt-ceiling crisis and the very real tragedy in Oslo was news of another foreclosure fraud settlement. Countrywide Home Loans agreed to pay $108 million to settle claims that they charged excessive fees to more than 450,000 borrowers. The settlement is the biggest in the history of the Federal Trade Commission and wound up being about double what the commission had originally estimated.
The scope of the fleecing is pretty amazing. Those 450,000 borrowers represented more than 1 percent of all mortgages in the United States. The entire business model was “based on deceit and corruption” according to Jon Leibowits, chairman of the trade commission.
Countrywide set up subsidiary companies to conduct property inspections, title searches and maintenance on homes going through foreclosure. These subsidiaries were then “hired” by Countrywide to perform those services, at a cost markup of more than 100%. For example, some troubled borrowers were charged as much as $300 by Countrywide to mow their lawns. The strategy was simply to increase profits from default-related services during bad economic times.
The excessive fees and improper charges were levied on borrowers whose loans were serviced by Countrywide. Most of the borrowers receiving money under the settlement were routinely charged excessive amounts by Countrywide for default-related services.
But that’s not all. Over 100,000 former Countrywide customers will share in the settlement because Countrywide gave them incorrect accountings about what was owed on their mortgages and added fees and escrow charges without notice.
While former customers may not see that much money from the settlement — most payments will be $500 or less, with 5% receiving $5,000 or more, the larger narrative is what we should focus on. Our banking industry, when given the opportunity, did not blink at leveraging a troubled economy and profiting off those most vulnerable so much so that they were willing to commit outright fraud to do so.
Photo from tracyo via flickr.