Countrywide, Wells Fargo settlements to return funds to homeowners
Some troubled homeowners got the promise of a little relief Wednesday in the form of separate settlements with Countrywide Home Loans and Wells Fargo & Co.
Nearly $108 million in refund checks are being mailed to homeowners allegedly overcharged by Countrywide Home Loans as part of a settlement with the Federal Trade Commission.
In an unrelated action against Wells Fargo, the Federal Reserve Board issued a cease-and-desist order and assessed an $85-million civil penalty over allegations that Wells Fargo Financial Inc. employees improperly pushed borrowers into more expensive subprime loans and exaggerated income information on mortgage applications from January 2004 to June 2008.
Last year, the Federal Trade Commission reached the settlement with Countrywide, which is now owned by Bank of America Corp., and said Wednesday that the agency was beginning to mail the checks to 450,177 defaulting homeowners from whom the company allegedly collected excessive fees.
“Countrywide’s unconscionable behavior harmed American consumers on a massive scale, and we are proud to be getting every single dollar back to hundreds of thousands of struggling consumers who can least afford to lose the money,” agency Chairman Jon Leibowitz said.
The refunds, ranging from a few hundred dollars to a few thousand dollars, are being distributed to defaulting homeowners whose loans were serviced by Countrywide from January 2005 to July 2008, and who were charged excessive fees for property inspections, lawn mowing and other services meant to protect the lender’s interest in the properties, the commission said.
When borrowers were trying to save their homes in Chapter 13 bankruptcy proceedings, Countrywide made false or unsupported claims about how much borrowers owed as well as the status of loans, the FTC said. In addition, Countrywide allegedly added fees and escrow charges to borrowers’ mortgage accounts without notice.
Rick Simon, a spokesman for BofA, said that the company settled the claims to avoid the cost of litigation. He also said that the claims began before the bank’s acquisition of Countrywide and cover transactions made by only Countrywide.
“Bank of America agreed to this settlement to avoid the expense and distraction associated with litigating the case,” Simon said. “There was no admission of any wrongdoing as part of the settlement.”
Wells Fargo also didn’t admit wrongdoing in reaching its settlement with the Federal Reserve, and the company said it had paid restitution to about 600 customers.
“The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo,” Chairman and Chief Executive John Stumpf said.
Wells Fargo was ordered to set up a process to determine who qualifies for refunds. The Fed estimated that 3,500 to more than 10,000 people might be owed money, ranging from less than $1,000 to more than $20,000.
BofA shares rose 28 cents to $9.85; Wells Fargo increased 29 cents to $28.70.
