Countrywide Settlement Hopeful: 'I Felt Smothered'

Photo: Fighting foreclosure: Rochelle Gear confident shell see money from new $108 million settlement between Countrywide, BofA and FTCABC News
Countrywide home loan borrower Rochelle Gear.

Rochelle Gear thought falling behind on her adjustable-rate mortgage was bad enough. But it got worse, Gear said, when her lender, Countrywide Financial, started tacking on new fees in addition to her mortgage debt and interest payments.

Gear estimates that Countrywide charged her some $3,000 for services related to her late mortgage payments on her Atlanta condo, including a fee when the company sent someone to visit the property to check if she was still living there.

"I went through months of fees and back and forth and harassment," said Gear, who first shared her story with "World News" in 2007. "I felt smothered."


Today, Gear hopes she'll be among at least 200,000 homeowners that the Federal Trade Commission has announced could be eligible for payments from a $108 million settlement with Countrywide over excessive fees.

According to the FTC, between 2005 and July, 2008, two Countrywide mortgage servicing companies charged "inflated" fees for property inspections, lawn-mowing and other services to borrowers who were in default on their loans. The fees, the FTC said, were sometimes marked up as much as 100 percent, leaving cash-strapped borrowers on the hook for hundreds or thousands of dollars. When customers tried to save their homes through Chapter 13 bankruptcy filings, the FTC said, Countrywide "made false or unsupported claims" about how much homeowners owed.

"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," FTC Chairman Jon Leibowitz said in a statement. "We're very pleased that homeowners will be reimbursed as a result of our settlement."

The alleged excessive charges occured before Countrywide was purchased by Bank of America in 2008.

In a statement, Bank of America said the settlement did not include an admission of any wrongdoing and that the bank agreed to the settlement "to avoid the expense and distraction associated with litigating" a case against the FTC.

Determining Who Gets Countrywide Cash Will Take Months

Exactly how much relief Countrywide borrowers will find from the settlement remains to be seen. Shortly after the settlement was announced Monday morning, critics noted on online message boards that on average, the 200,000 borrowers expected to be eligible for the settlement would see just $540 each.

That average could fall even lower -- FTC spokesman Frank Dorman said that more than 200,000 borrowers could be eligible for the $108 million pot.

But Dorman said it's not appropriate the couch the settlement in terms of averages.

"Some of these people are going to get thousands of dollars," he said. The amount that each borrower is eligible for will depend on individual circumstances and how many consumers ultimately choose to participate in what the FTC is calling a redress program.

Over the next few months, the FTC will pore through bank records to determine who is eligible for the program and will be contacting consumers by mail, Dorman said. Find more information from the FTC HERE.

Dorman said it's unclear how many of Countrywide borrowers who could be eligible for the settlement actually managed to hold on to their properties and how many lost their homes to foreclosure.

Gear, 32, may be one of the lucky ones. Through the help of a consumer advocacy group, she managed to obtain a 30-year fixed mortgage with Countrywide with a lower interest rate. (Bank of America now owns her loan.)

But today, a couple of unfortunate circumstances -- the decline in her hairstyling business and a fire at her condo building -- have left Gear struggling to keep up with her monthly mortgage payments yet again. She said she's trying to get her loan modified. In the meantime, she said, even a minor payment from the FTC settlement would help.

"I want my cut," she said.

Michelle Byrum, 46, is another former Countrywide customer who hopes she'll be eligible for the settlement. Byrum, from Roseville, Michigan, said that she and her husband ended up paying some $2,000 in default-related service fees when they fell behind on their mortgage payments in 2007.

Byrum and her husband are both out of work and are trying to short-sell their house. Any payment from the settlement probably won't help them save their home, she said, "but it'll help us move."

Small Cash Awards, Big Message

The FTC Countrywide settlement may be the largest of its kind, but it's not the first settlement over deceptive mortgage lending practices since the collapse of the housing market. In March, for instance, the U.S. Department of Justice announced a $6.1 million settlement with two subsidiaries of AIG over allegations that they charged higher mortgage fees to African-American borrowers.

Kathleen Day, of the Center for Responsible Lending, said that value of such settlements isn't necessarily in how they compensate victims of deceptive lending but rather in the message that they send.

"All these amounts of money are small in comparison to the billions of dollars in lost equity, in homes people have lost and the pain and suffering beyond that," she said. "But it hopefully sends a signal that the federal government is going to do more to police against unfair and deceptive practices."

Dorman, while emphasizing that some consumers may see significant amounts in compensation, also stressed the settlement's implications for the mortgage industry.

"We want the message to get to the mortgage servicing industry -- this will not be tolerated, these kinds of practices are against the law and we will be pursuing any activity like this that we find in the future," he said.