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Country Wide Bank - Country Wide Bank: FTC Allegations and BOA Settlement

homeowners loans home billion

Country Wide bank was purchased by the Bank of America in 2008 and since then, has gone through court hearings, settlements and other legal problems. Currently, in a settlement agreement announced in June 2010, the Federal Trade Commission ruled that Country Wide bank must pay over $108 million to consumers to pay back the grossly overcharges billed to them for various services such as appraisals, lawn care services, and inflated property inspection fees, among others. This settlement covers over 200,000 homeowners who held a mortgage with Country Wide from 2005 to 2008, when BOA purchased the mortgage lending institution.

Angelo R. Mozilo, originally founded Country Wide Bank over 40 years ago with the help of the late David Leob (D. 2003) and called the company Countrywide Financial Corporation. The Corporation made over $500 billions worth of home loans and had over 62,000 employees scattered across 900 offices. When the home mortgage business boomed in 2000, Country Wide Bank became the most aggressive and most successful banks in the United States in the home lending sector.

However, as did all mortgage lenders when the recession hit the homeowner industry in 2007, Country Wide Bank lost momentum and withdrew their $11.5 billion line of credit from all banks concerned because they did not have the ability to continue buying and selling against the borrowed money. When the Bank of America Stepped in, they invested over $2 billion in return for 16 percent of the company, later which BOA purchased outright for $4 billion worth of stocks, which is when the founder, Mr. Mozilo left Country Wide Bank.

February of 2008 brought a lawsuit filed by the United States Trustee against Country Wide, which questioned their lending practices during bankruptcy cases. The FTC alleges that Country Wide not only charged fees that were excessive and unwarranted, but they also made false claims about the borrowed amounts oh which they had no proof and did not notify any of the borrowers of fees attached to the loans because of the homeowners filing for bankruptcy.

Additionally, the suit stated that the company showed a pattern of fraud which led to Illinois and other stated to sue Country Wide Bank as well. This pattern alleged that Country Wide sold loans to borrowers which were not only defective and costly, but also quickly fell into foreclosure proceedings as well.

As part of a settlement agreed upon between Country Wide and the states of Illinois and others in October 2008, the Bank was to issue a relief plan costing $8.4 billion. This plan covered over 400,000 Country Wide Bank loan holders across in 11 states. Since then, criminal charges were brought against the bank’s founder, David Sambol and Eric Sieracki, former COO and CFO respectively, alleging securities and insider trading.

The Bank of America decided to start forgiving debt of over 45,000 loan holders whom had borrowed from Country Wide Bank; however, only those whom had a high-risk or sub-prime loan were eligible for the relief. This is what led to the $108 million settlement to borrowers and to the new charges filed in June 2010 alleging that Country Wide bank, in federal bankruptcy court, made false filing claims. The Federal Fraud Enforcement Task Force will follow up on these allegations and proceed as it deems necessary, which could include criminal charges against Country Wide bank, now known as Bank of America.

Homeowners during 2005 and 2008 whom had loans through Country Wide Bank need not do anything to receive the refund from the settlement, as they will receive a letter on the mail if they are entitled to part of the settlement. The troubled past of Country Wide bank serves as a reminder of how powerful the banking and housing industries are.

Without the sub-prime and high risk loans offered by these institutions, it would be almost impossible for some homeowners to even think about buying a home. However, just because the potential homeowners and borrowers have a troubled credit history, does not mean the banks can take advantage of them, which is what the FTC alleged and proved with this settlement.

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