Countrywide Bank (now owned by Bank of America) has settled a case with the Federal Trade Commission over unfair and exorbitant fees it charged to homeowners who got behind on their mortgage payments.
Countrywide hit borrowers who were behind on their mortgages with fees of several thousand dollars at times, the FTC said. The fees were for such services as property inspections and landscaping that far exceeded market rates. Countrywide created subsidiaries to hire vendors, which marked up the price for such services, the agency said.
"Countrywide profited from making risky loans to homeowners during the boom years, and then they profited again when the loans failed," Leibowitz said
Countrywide, as well as other banks, have little incentive to deal fairly with homeowners seeking mortgage modifications because they make so much money soaking desperate people who are at the end of their financial rope. When the banks act rapaciously with no regard for morality or even legality is it any wonder that homeowners become numb to the idea of “moral hazard” and are willing to walk away from their underwater homes, or go into strategic default to try to force the renegotiation of their loans?
The settlement will cost parent company Bank of America $108 million. Considering that B of A is the largest collector of mortgage payments in the country, or so says MSNBC, $108 mil sounds a bit like a slap on the wrist. After all, B of A’s enterprise value as of June 10, 2010 is over $458 billion. This fine represents .02% of that, or 2¢ per $100.
The FTC is charged with enforcing federal laws designed to prevent abuses by companies that collect consumers’ debts. That’s because mortgage-collection activities are typically handled outside the oversight of federal banking regulators.
Critics say the agency lacks the expertise or resources to enforce those laws.
Understand the source of this problem? The hollowing out of government oversight. We have had 8 years of the hollowing out of our government. The talent and expertise have fled to the private sector and academia. We, as a nation, need to lure those people and the new crop of talent into government service; that comes from the top. You want hope, you want change? Then the president has to be the Recruiter-in-Chief.
He also has to get his government in gear, too many second and third tier administration positions remain unfilled a full 1-1/2 into the presidency. That is really bad chief of staffing work. We need to rebuild our oversight infrastructure. Or else, we will see the housing crisis continue to slide into a “W” shaped crisis instead of a “U” or “V” shaped depression. We will continue to see environmental disasters. We will continue to see rampant fraud by military vendors. We will continue to careen from one emergency or disaster to another. The president needs to get his team on the field with their heads in the game. Start rebuilding our governmental oversight infrastructure NOW.
[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]