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Bank of America pays Countrywide fine

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By : John Smith    99 or more times read
The saga of the Countrywide foreclosure scam is finally coming to a close as Bank of America settles complaints that its stepchild mauled borrowers like a hungry lion. But that does not mean that the government investigation is over – indications are that what Countrywide got up to was the rule, and not the exception among American mortgage lenders.

“The Countrywide settlement exposes a widespread and longstanding industry practice,” National Consumer Law Center attorney Diane Thompson has been quoted as saying. “The settlement offers some real hope of reining in the worst abuses in bankruptcy court — by requiring Countrywide to verify the amount owed and make sure they are charging reasonable rates — and should help reaffirm what is, I believe, already the law: You can’t put people in foreclosure who aren’t in default, and you shouldn’t overcharge homeowners in default for bogus services.”

The homeowners who were the victims of Countrywide scams complain about fees being charged for services not provided, and unwarranted penalties being levied. Banks have been getting away with this sort of thing for years – mortgage contracts are frequently cloaked in un-American English, and verifying bank computations is well nigh impossible without access to spread sheeting.

The following are some of the nastier things that at least some American banks have been doing:

  • Research has indicated that nearly 50% of mortgages looked at were overstated in terms of inflated balances and unspecified fees. 90% of borrowers interviewed agreed that they did not trust their accounts.

  • Although the individual illegitimate fees are usually small in value, they add up to huge amounts when extrapolated across the total customer base. By way of an example, $50 per 250,000 accounts adds up to $12,5 million – a tidy sum of money for quietly pushing a few computer buttons.

  • Some mortgage lenders are so casual about the way they do business that they don’t even follow a formal verification process before collecting loan payments from a bank account.

Bank of America will be paying a $108 million fine to the Federal Trade Commission – small change in terms of the scale of abuse, and naturally without admitting liability either.

“The size of the judgment is justified in light of Countrywide’s callous conduct, which took advantage of consumers already at the end of their financial rope,” FTC Chairman Jon Leibowitz has been quoted as saying.

It’s just a pity that the government’s response and the size of the fine are both so dwarfed by the magnitude of the wider problem still emerging. While 200,000 Countrywide borrowers have received band-aid, how many more Americans are still out there bleeding?
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