The U.S. Federal Trade Commission has settled with a couple of mortgage servicing firms for more than US$100 million, over allegations that they collected excessive fees from struggling homeowners.

The FTC’s complaint and settlement order name Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly Countrywide Home Loans Servicing LP, as defendants. Countrywide was acquired by Bank of America in 2008.

The settlement requires Countrywide to pay US$108 million, which will be refunded to homeowners who Countrywide overcharged before the firm was bought by BofA.

In addition, the settlement order prohibits Countrywide, which continues to service millions of mortgages, from taking advantage of borrowers who have fallen behind on their payments. And, it requires Countrywide to make significant changes to its bankruptcy servicing practices, the FTC said.

According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees. It says that 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; but it created subsidiaries to hire firms to provide those services and then marked up the price of the services, often by 100% or more, the FTC alleged.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC chairman, Jon Leibowitz. “Were very pleased that homeowners will be reimbursed as a result of our settlement.”

IE