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Bank of America has settled a Countrywide lawsuit with the Federal Trade Commission for $108 million, over allegations that Countrywide defrauded borrowers with illegal fees in 2008. The settlement represents one of the largest FTC settlements on record and is the largest mortgage service settlement ever. The money will be repaid to borrowers, but it will take several months to calculate and distribute.
FTC Chairman Jon Leibowitz was highly critical of the practices of Countrywide, slamming them (and also offering a not-so-subtle dig at fraternities in the process). "The record-keeping of Countrywide was abysmal," said Leibowitz. "Most frat houses have better record-keeping than Countrywide."
According to the FTC, Countrywide over-charged customers even when they were already in bankruptcy, sometimes marking up fees by as much as 400 percent.
Earlier this year, other Countrywide lawsuits were settled with investors for $624 million. Bank of America and Countrywide denied any wrongdoing in that settlement. The Countrywide class action case made major headlines at the time.
Countrywide was known for a number of shady practices, which are widely believed to have contributed to the financial crisis. Former CEO Angelo Mozilo and two other former Countrywide executives are defendants in a civil suit filed by the SEC, alleging they misled investors and broke insider trading laws.
"Anyone who believes the blame for the housing crisis rests with borrowers should read this settlement and learn just how shameless these lenders were during these years," Sen. Charles Schumer said.
Bank of America said in a statement that it agreed to the settlement to avoid the expense and distraction of litigating the case.