Members of a Senate committee yesterday hammered away at a Countrywide Financial Corp. executive who they accused of boosting profits by charging extra fees to homeowners losing their houses through foreclosure.
The Senate Judiciary Committee is considering legislation to prevent mortgage lenders and lawyers from taking advantage of homeowners as they struggle to keep their property.
“As bankruptcies swell and defaults rise and revenue streams dry up, I fear a vulture mentality is developing in some quarters,” said Sen. Charles E. Schumer, New York Democrat.
Lawyers will sometimes charge homeowners more than $30,000 to file for bankruptcy in a gamble to keep their homes, witnesses at the Senate hearing said. Mortgage lenders will add thousands of dollars more in fees for late payments, property inspections, brokerage price opinions, photocopying and overnight mail delivery.
Mr. Schumer called the added costs to homeowners “a maze of dubious and undocumented fees.”
In the mortgage industry, the added fees are called “piling on.”
A mail carrier from Georgia testified about her family’s losing struggle to save their home through bankruptcy while Countrywide charged them fees they did not understand.
Countrywide is the nation’s largest mortgage lender.
“It seems as if Countrywide used the bankruptcy court to gain even more opportunities to take advantage of our predicament and to profit from our struggle,” said Robin Atchley, who testified as her husband and four children looked on.
Steve Bailey, Countrywide’s chief executive for loan administration, said three internal audits by the company in the past two months led to reforms he announced at the Senate hearing.
They include hiring an “outside auditor” to check the accuracy of the company’s billings to homeowners who declare bankruptcy and establishing an ombudsman’s office to review “any perceived discrepancies on accounts in bankruptcy,” Mr. Bailey said.
Countrywide also is adopting “best practices” for handling foreclosure accounts recommended by the National Association of Chapter 13 Trustees. Chapter 13 refers to a section of the federal bankruptcy code.
“You’re always adopting good practices after they’re exposed,” Mr. Schumer told the Countrywide executive. “So then would you say six months ago you weren’t doing the right things here?”
Mr. Bailey replied, “No, I wouldn’t go that far.”
Katherine Porter, a University of Iowa associate law professor, testified about her study showing that among 1,733 foreclosures in 2006 that she analyzed, mortgage lenders added questionable fees to borrowers’ bills for nearly half the loans.
PILING ON
Some examples of fees charged by lawyers and mortgage lenders to homeowners who tried to avoid foreclosure by declaring bankruptcy.
Attorney’s fees$31,273
Bankruptcy fees $2,275
Broker price opinion fee$1,489
Demand fee$145
Overnight delivery$137
Payoff statement fee$60
Fax fee$50
Source: University of Iowa College of Law
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