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Several firms now participating in the Treasury's program to modify troubled mortgages have run into problems with federal or state regulators for their treatment of their customers over the years. They include:
•Countrywide Home Loans, part of Countrywide Financial, the company that was one of the major forces behind the rash of risky mortgages and which Bank of America purchased in July 2008.
According to a 2008 lawsuit by the Illinois attorney general and other states, consumers who fell behind on their mortgages and then called Countrywide were "shuffled from person to person and even department to department before reaching someone who can actually address their concerns." Even then, the lawsuit said, Countrywide demanded an upfront payment before working on a modification - and often, consumers paid up front even though there was no chance their loan could be reworked.
Beyond that, Countrywide refused to work with some homeowners. When one fell behind on her mortgage payment because she was being treated for breast cancer, her church raised money to help her out and sent the money to Countrywide. However, the company refused it because the check had been drawn on the church's account, the lawsuit said.
Other consumers were given modifications that actually raised their monthly payments. In one case, the attorney general's office had to intervene after Countrywide boarded up and changed the locks on a borrower's house before it had a legal judgment to do so.
In October 2008, Illinois Attorney General Lisa Madigan and 10 other states announced that Countrywide (and its new owner, Bank of America) had agreed to settle the case for $8.7 billion, the largest predatory lending settlement in history. Nationwide, about 400,000 homeowners were expected to get settlement funds to help them rework their Countrywide loans.
In announcing the Countrywide settlement, Bank of America said it has "committed significant resources and developed innovative programs to help as many Countrywide customers as possible."
Since then, the bank said it's surpassed projections for helping customers under the settlement agreement and Allen H. Jones, a Bank of America executive, said the bank is "committed to doing everything we can do keeping borrowers in their homes."
•Saxon Mortgage Services, a unit of Morgan Stanley, was sued in 2008 by the attorney general of Missouri. According to the lawsuit, Saxon failed to properly credit loan payments even after customers had proved the payments had cleared their bank accounts. Saxon then charged late fees to those customers, who couldn't get anybody on the phone when they called for an explanation. While not admitting wrongdoing, Saxon settled the case and agreed to a voluntary compliance agreement.
A Saxon vice president, Greg Smallwood, said that after Missouri's investigation, the case resulted in no violations and no fines, and that the compliance agreement only stipulated that the company would continue to comply with the law.
