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.