Watch and See with Countrywide...in the "Hot Seat" again

Countrywide and Bankruptcy Abuse

Countrywide is on the ‘hot seat' again.  A Senate Judiciary subcommittee, recently heard testimony regarding allegations that Countrywide abused bankruptcy laws to overcharge struggling borrowers, with one company executive admitting that employees made mistakes "from time to time," but denied any "systematic errors".   During the hearing, Steve Bailey, Countrywide's chief executive for loan administration and head of the company's servicing division, disputed charges made by hundreds of Countrywide borrowers who accuse the nation's top mortgage lender of collecting inflated fees and filing inaccurate bankruptcy documents.

"Countrywide has implemented or is in the process of implementing steps to further enhance the transparency, accuracy and integrity of this process," said Bailey.

According to Bailey's Senate testimony, Countrywide has hired an outside auditor for a random sample of loans in bankruptcy and established a Bankruptcy Ombudsman's Office "to ensure that borrowers and their counsel can have the means to seek a high level review of any perceived discrepancies on accounts in bankruptcy."

The Justice Department has opened a criminal probe to investigate the accusations.

A professor at the University of Iowa, Katherine Porter, testified that mortgage companies and servicers such as Countrywide have frequently attempted to collect repayment for attorneys' fees and other costs without properly disclosing or documenting the fees.

Porter said the companies sometimes continued to press for foreclosure even after borrowers have arranged with bankruptcy courts to discharge their debts, which allows the struggling homeowners to hold on to their homes while working out payment plans.

As chairman of the Senate panel, Sen. Charles Schumer said he was convinced that "companies have repeatedly sought to foreclose on homes where owners were current on payments, sought attorneys fees in bankruptcy court for motions that they have lost, and failed to keep even the most basic records to justify their claims in bankruptcy court."