Countrywide Sued Over 'Excessive' Fees on Defaults
LOS ANGELES (Reuters) - Countrywide Financial Corp CFC.N charged thousands of borrowers facing foreclosure "excessive, unreasonable" fees and expenses, according to a proposed class action filed in Delaware Chancery Court.
The lawsuit, filed on Monday, accuses the embattled number-one U.S. mortgage lender of unjustly profiting from inflated fees charged to homeowners whose loans were delinquent or in foreclosure to compensate for huge subprime loan losses.
In a statement, Countrywide said on Wednesday it "does not believe this case has merit and expects to present a vigorous defense."
The suit, by New Jersey plaintiff Gregory O'Gara, comes amid scrutiny by federal and state law enforcement agencies, including the Office of the U.S. Trustee and the Florida attorney general, of Countrywide's loan servicing practices.
Countrywide also faces numerous lawsuits by investors contending the company issued false and misleading statements to inflate its share price, and at least one other action by homeowners claiming it conducted false appraisals to artificially drive up faltering home prices.
O'Gara brought the suit on behalf of his now-deceased mother, who fell behind on the mortgage on her Florida home while ill.
While Countrywide mortgage agreements allow it to charge delinquent homeowners for the costs of bringing their loans current, they do not allow the lender to tack on "excessive, unverified and unreasonable costs, fees and expenses," the lawsuit said.
An investigation by the plaintiffs showed Countrywide has arrangements with attorneys for flat-fee, per-case rates of typically $300 to $500 per case, but often charges defaulting homeowners up to four times that amount, the lawsuit said.
The company also pads its loan pay-off amounts with court costs, improper late and delinquency charges and fees for unneeded appraisals which consist of little more than an inspector driving past the properties, the lawsuit said.
Countrywide reported this month that foreclosures and late payments rose in January to the highest on record, reflecting a deepening U.S. housing slump and credit crunch.
The foreclosure rate for the 9.02 million mortgages on which Countrywide collects and processes payments roughly doubled last month to 1.48 percent from a year earlier.
Calabasas, California-based Countrywide agreed last month to be bought by Bank of America Corp (BAC.N) in a transaction originally valued at about $4 billion.
(Reporting by Gina Keating; Editing by Braden Reddall)
