June 8, 2010 4:35 PM
King & Spalding Helps BofA Settle FTC Charges Against Countrywide
Posted by Drew Combs
With its vast array of subprime loan offerings during the real estate boom, Countrywide Financial came to symbolize just how risky the mortgage business got during those heady times. Now that the bubble has burst, Countrywide has adopted a more conservative posture--at least when it comes to how it handles the lawsuits stemming from those risky loans.
According to an article in sibling publication The Am Law Litigation Daily, over the past two months Countrywide has reached record-setting settlements in two such cases for a combined total of more than $700 million.
The most recent settlement emerged Monday, when the Federal Trade Commission announced that two Countrywide mortgage-servicing companies will pay $108 million to settle charges that they deceived struggling borrowers. The FTC said the money is to be refunded to borrowers whose loans were serviced before July 2008, when Countrywide was acquired by Bank of America. The Lit Daily notes that "the FTC described the deal as one of the largest judgments ever imposed in an FTC case and the largest-ever resolution of a mortgage-servicing case."
The FTC's complaint alleged that Countrywide charged defaulting and late-paying borrowers excessively high fees for services such as lawn mowing and inspections meant to protect the lender’s interest in the property. The FTC also accused Countrywide with misleading borrowers regarding information about outstanding balances due and loan status.As part of the settlement, the company also agreed to new disclosures and guideline regarding fees charged to borrowers. The FTC described the cases as largest-ever resolution of a mortgage-servicing case.
Bank of America said in a statement that it agreed to a settlement with the Federal Trade Commission “to avoid the expense and distraction associate with litigating the case.” The company, represented by King & Spalding, did not admit any wrongdoing.The FTC announcement comes a month after Countrywide agreed to pay $600 million to settle a securities class action--the largest payout yet in a subprime mortgage-related lawsuit. Make a comment