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Bankruptcy Documents Questioned

Countrywide denies it fabricated documents

January 9, 2008


photo of Patrick Crowley

Countrywide Home Loan Inc. is denying it tried to "fabricate" documents in the case of Pennsylvania borrower facing foreclosure who filed bankruptcy.

In the case in U.S. Bankruptcy Court in Philadelphia, Countrywide is accused of re-creating escrow letters to show that Sharon Diane Hill owed nearly $5,000 in payments, according to court documents.

Hill, through her attorney, contends she did not owe the money through an agreement she had with Countrywide, the loan's servicer.

"Ms. Hill went through bankruptcy," her lawyer, Julia Steidl, told the court, according to a transcript of a Dec. 20 hearing. "She did everything right. She made all of her payments. The application for approval of completion was filed. Nobody objected."

Steidl said the court discharged the case. But when Hill started making payments to Countrywide in 2003 the company returned the payments, saying she was in default of her loan.

Steidl claimed she was told by Countrywide's lawyers that the letters were "re-creation" letters, basically documents that were re-created to show that Hill still owed money.

"It is not Countrywide's policy to create or 'fabricate' any documents as evidence that they were sent if they had not been," Countrywide spokesman Rick Simon said in a 3-page statement issued by company. "We believe it will be shown in further discovery that the Countrywide bankruptcy technician who generated the documents at issue did so as an efficient way to convey the dates the escrow analyses were done and the calculations of the payments as a result of the analyses.

"At no point was there any assertion or demonstration that these letters had been sent previously."

Judge Thomas Agresti raised concerns after hearing the allegations of re-created documents.

"What is a -- never heard of a re-creation letter," Agresti said. "That's a letter that they don't have, and how they've re-created to support the allegation that they actually sent a prior letter?"

"All of these letters -- there were three of them, and they were all re-created," Steidl said.

"These letters," Agresti said, "are a smoking gun that something is not right in Denmark."

Countrywide said it sometimes uses letters "to communicate escrow changes to borrowers as a means of communicating the escrow change information in a narrative form."

"The dates of the letters merely show to the reader the date the escrow was calculated," Countrywide said. "They were not placed there as evidence of a 're-creation.' Nobody within Countrywide, including the bankruptcy technician, ever contended the letters were copies or re-creations of letters previously sent."

Countrywide added that "the judge's comments and questions were impromptu and exploratory in nature, and not conclusive in any way."

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]

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