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Countrywide Sued Over Borrowers' Foreclosure Fees

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By SOPHIA PEARSON, Bloomberg News

Published: February 27, 2008

Countrywide Financial Corp., the largest U.S. mortgage lender, is being sued by the estate of a Florida woman and accused of charging borrowers improper foreclosure fees.

Starting in February 2002, Countrywide overcharged for attorneys' fees tied to foreclosures and imposed unjustified interest, escrow and late charges, according to a complaint filed Monday in federal court in Wilmington, Del.

"As a result of Countrywide's improper practice of overcharging fees and expenses, those borrowers who have enough funds to pay past due debt and other foreclosure costs, but are unable to pay the greater sums, remain subject to losing their homes," lawyers for Gregory O'Gara, who sued as executor of the estate of Tamara Portnick, said in the complaint.

Countrywide, which Bank of America Corp. is buying, lost more than 80 percent of its value in the past year because of falling home prices and rising defaults.

The Calabasas, Calif., company said this month that late payments were at the highest level in at least six years in January.

Countrywide spokesman Rick Simon said he had not seen the complaint and had no immediate comment.

O'Gara accused Countrywide of making arrangements with attorneys for flat, per-case rates of about $300 to $500 and then charging the homeowners $1,200 to $2,000 for the expenses.

The company also was accused of charging excessive fees for appraisals, from $300 to $500, regardless of whether an appraisal is really done on the property. If fees are not paid by borrowers, they are added to the settlement amount on a foreclosure sale of the property, the complaint states.

Countrywide violated its obligations by imposing the excessive fees, the complaint said. In some cases, borrowers cannot recoup their equity after foreclosure sales, it said.

O'Gara asked for class-action status for the lawsuit, allowing him to represent all homeowners who have faced foreclosure action from Countrywide, in addition to unspecified damages.

Foreclosures are running at record levels amid the worst U.S. housing market in 26 years. Countrywide's overdue loans rose to 7.47 percent of unpaid principal balances in January from 7.2 percent in December and 4.32 percent in January 2007, the company said this month in a statement. The company along with several other lenders are under scrutiny by U.S. bankruptcy trustees in Florida, California, Texas and Arizona for possibly overstating how much they are owed by bankrupt homeowners.

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