California Mortgage Foreclosure Laws Get Help From FTC

The California mortgage foreclosure laws got a bit of help from the Federal Trade Commission (FTC) on Monday when it ordered two of Countrywide’s mortgage servicing companies, who are now part of Bank of America Home Loans, to pay $108 million in settlement charges to their borrowers.  This payment is the result of Countrywide charging excessive fees from cash-strapped borrowers who were struggling to keep their homes. This is one of the largest judgments ever imposed in an FTC case.  In a released statement, the FTC said the $108 million settlement will reimburse overcharged homeowners whose loans were serviced by Countrywide.  According to the FTC, Countrywide used unlawful practices in servicing homeowners’ mortgages, violating Federal and California mortgage foreclosure laws.  The California mortgage foreclosure laws work in tandem with Federal laws, and in this case, Californian borrowers got some needed assistance from the FTC.

California Mortgage Foreclosure Law Violations 

Countrywide has allegedly been charging excessive fees for default-related services which are heavily concentrated in California.  Countrywide was accused of making false claims about the amounts owed by homeowners in bankruptcy, using amounts that couldn’t be backed up.  Countrywide also allegedly didn’t tell people going through bankruptcy when new fees or charges were being added to their loans. 

New Precedent Established For California Mortgage Foreclosure Laws 

Going forward, borrowers in Chapter 13 bankruptcy must be sent a monthly notice with information about the amounts that are owed – including any fees assessed during the prior month.  Additionally, Countrywide must ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.  These requirements set precedent, having the effect of supplementing California mortgage foreclosure laws.

Clearly, Bank of America (Countrywide) got caught, which is why they agreed to this settlement.  It goes to show that, for the lenders, it is all about the money and their concern for the customer is secondary at best.  Some lenders will do whatever they need to do to squeeze out more profits without concern for how it affects their customers. 

In separate reports, it has been clearly documented how lenders are using a campaign of fear and guilt to keep homeowners paying their mortgages, even when the lender knows that the homeowners cannot afford the payments. 

This is a strategy to bleed the homeowners dry.  When the homeowners are completely depleted of their funds, the lender forecloses.  This is a strategy that maximizes the lenders’ income, but shows zero concern for the welfare of the homeowners.

 Clearly, this strategy does not benefit homeowners.  It would be better if homeowners got assistance earlier in the process to make an objective assessment of their situation.  If they can afford or almost afford the property, a work-out plan (loan modification) with the lender should be pursued.  If they cannot afford the property or have negative equity, then it is usually better to keep what’s left of their savings and credit rating, and develop a plan to get rid of the property. 

It is imperative that the homeowners find someone who can assist them during this process to ensure the best possible outcome is identified and implemented.