It's no wonder we get fraud, abuse of customers, ripoffs as standard fare by corporations.
Countrywide agrees to pay a $108 million fine for excessive fees on home loans, one of the biggest fines by the FTC.
When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.
Countrywide is now owned by Bank of America. In 2008, Countrywide held a mortgage portfolio valued at $1.4 trillion.
Countrywide even tried to skirt bankruptcy law and make broke homeowners, now out of a house, pay even more fees after the fact.
In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.
The delinquency and foreclosure rates, now up to 14.01% in Q1 2010 and were over 8% starting in 2008. Assuming Countrywide has an average delinquency and foreclosure rate, that would be $196 billion of delinquent and foreclosed homes in their 2008 portfolio.
The FTC's fine would only be 0.005% of the foreclosed values. This is a very rough estimate, assuredly low, of Countrywide's delinquent and foreclosed homes.
In one week of 2009, Countrywide had 16,000 bank owned properties listed for sale. Assume each bank owned home has a fee rip off of $100 dollars. That is $1.6 million in just that week. $1000 dollars is $16 million in rip off fees for just that week in Countrywide properties that are listed for sale. These numbers are nowhere near the total amount of homes that were foreclosed on or delinquent and held by Countrywide.
In other words, this fine is a slap on the wrist, as most fines are. A toll, a cost of doing business. An ante to play.
Frat Houses have better accounting than Countrywide
The FTC is having difficulty distributing this fine (which again, all regulatory agency fines for wrong doing are a slap on the wrist, including this one, same with other government fines for violating regulations), to the people victimized.
Reuters reports the FTC is saying Countrywide's bookkeeping is abysmal.
200,000 homeowners to get the Countrywide/BoA fine
AP report.
That's an average of $540 a piece. If the these rip off fees totaled in the thousands, per home owner, then this fine is not recovering even the original ripoff amount, never mind the additional hardship and emotional toll.
Home owners had no choice in who serviced their mortgage, countrywide was #1, then did this bogus services and fees, jacking up the costs over 100%.
Another question is the real number of homeowners. 200,000 or is it more than that?
Regardless the fee is too small. All of these fees are too small because they just become an operating cost. That won't even cause a fraction tick in BoA's stock price. Be a blip on their quarterly report.
We need personal liability or plain jail time for a lot of these corporate crimes and abuses. Currently you can pretty much get away with murder if you are incorporated and assuredly that's the situation here.
This is only HALF the story.....
Entirely agree. However, this is only a fraction of the story. Nearly every article I read regarding this news when it broke, was virtually a 'lifted copy' from whomever wrote the original article. In other words, no other reporter picked this story up (as far as I know now) to delve further into the background and do some investigative reporting, as Woodward and Bernstein did on the Watergate break-in. Where are our bull-dog reporters who can smell a hidden story? Here is one instance of the reporting field missing (or just tamely believing - I cannot tell which it is) the press spin from Bank of America: "These incidents (referring to what the FTC investigated) were prior to Bank of America purchasing Countrywide in June 2008..." In other words, Bank of America gets let off the hook for a miserly $108 million fine because the intimation is that "this was Countrywide doing these things, and we did not won them then" - well, for those of us who know, Bank of America was the primary funding source and, I believe, largest investor in Countrywide for MUCH longer than just June 2008. In fact, they were so closely linked that they both shared the same back-office processes and guidelines...and if ANYONE out there believes for even one SECOND that Bank of America has, and still is, not engaging in the exact same activities as Countrywide, then they were either born yesterday or incredibly naive. I should know, because I am trapped in their same game, and this story alone would make a Hollywood movie. My words to the FTC: Why did you stop at Countrywide??? Why have you not investigated Bank of America for these identical activities?