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Countrywide Accused of Inflating Foreclosure Fees

Countrywide Accused of Inflating Foreclosure FeesDelaware case seeks class action certification

February 29, 2008

By SAM GARCIA

A unit of Countrywide Financial Corp. has been sued for allegedly inflating foreclosure expenses. Plaintiffs are seeking class action certification.

Gregory O’Gara filed the lawsuit on behalf of himself, his deceased mother, Tamara Portnick, and others similarly situated former borrowers against Countrywide Home Loans Inc. in the U.S. District Court, District of Delaware, on Tuesday.

Portnick originally executed her $176,000 note with MortgageLine.com, a division of The New York Mortgage Co. LLC, on June 19, 2003, the lawsuit indicated. The note was a standard “Fixed Rate Note-Single Family-Fannie Mae/Freddie Mac Uniform Instrument” which stated, “Under The Terms of the Mortgage Note, the Borrower’s Liability Is Strictly Limited to Reimbursement of Actual Attorneys’ Fees and Other Costs, Fees, and Expenses Actually Incurred by Countrywide.”

Countrywide, which did not immediately respond to a request for a statement, is accused of extracting improper fees, expenses and attorney fees from borrowers in foreclosure proceedings. In some cases, the Calabasas, Calif.-based company allegedly charged higher fees than it incurred — a breach of the notes.

Carmella P. Keener, the lawyer for the plaintiffs, is seeking a refund of these overcharges on behalf of “hundreds of thousands” of borrowers who were charged excessive fees and expenses.

Among the overcharges are attorneys’ fees where Countrywide had entered into fixed fee arrangements with attorneys who handled its foreclosures but charged borrowers a higher amount, according to the class action complaint. Attorneys for the plaintiffs claim their research indicated these rates are between $300 and $500.

The 3-count complaint also discussed enforcement counsel utilized by Countrywide to handle borrowers from the point that they default. This service includes making calls, sending letters and filing foreclosure actions on behalf of Countrywide. Once borrowers have gone through the enforcement process, the enforcement counsel demands that they pay between $1,200 and $2,000 — even though “there is no contractual relationship between enforcement counsel and the borrowers subject to an enforcement action.”

Other fees charged in excess of the amounts paid included filing fees, late charges and process server fees.

Full appraisal fees from $300 to $500 were often charged even though a full appraisal was not done, the plaintiffs allege. Instead, either a broker opinion, drive-by appraisal or no appraisal was done. “A proper appraisal … typically consists of an actual visit, wherein the appraiser actually gets out of his or her automobile.”

The complaint cited a probe by the Justice Department’s U.S. Trustee of Countrywide for possible inflated fees it charged to bankrupt borrowers.

The trustee has “a specific and grave concern” that Countrywide is using bankruptcy court rules and procedures “to obtain money and property from bankruptcy estates on either what appears to be faults factual basis or faults legal basis, a serious concern,” stated the acting associate general counsel for the U.S. trustee at a November hearing on 10 cases that have been consolidated into one.

This week’s lawsuit indicated that the Trustee also initiated a probe into Countrywide’s foreclosure practices during November.

In some cases, when foreclosure sales generated more proceeds that the loan balance, borrowers lost the excess funds because of the overcharges, the complaint alleges.

“As a result of Countrywide’s breaches of mortgage notes, plaintiff and the other members of the class were damaged by the amount of costs, fees and expenses they overpaid in connection with enforcement and foreclosure proceedings pursued against them by Countrywide,” the complaint states. “Plaintiff and the other members of the class are entitled to recover such amounts that were improperly demanded and paid.”

Case: 1:08-cv-00113-UNA, O’Gara v. Countrywide Home Loans Inc.

Related:

Countrywide BK Claims Probed by U.S. Trustee
Countrywide Financial Corp. is being investigated by a U.S. trustee to determine, among other things, whether it inflated the amount it is owed on bankruptcy claims. Counsel for Countrywide said the actions by the trustee, who has entered more than 16 cases involving lenders in at least five states, are random instances of prosecution without cause.


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