Sunday, December 9, 2007

Gov't more likely to crush cfc than bail them out.

New York Post



December 9, 2007 -- The heat Countrywide Financial Corp.'s Angelo Mozilo is feeling recently isn't from a nearby sunlamp.

Two bankruptcy judges have recently allowed federal investigators to grill Countrywide executives and pore over reams of mortgage contracts after allegations surfaced that the nation's No. 1 mortgage banker could have been running up fraudulent fee income by over-billing homeowners reorganizing under Chapter 13.

In just one court over just a few years, a court-appointed trustee claims Mozilo's Countrywide rang up thousands of dollars in phony fees in each of 293 court cases.

Countrywide created late fees by failing to timely cash checks sent to cover the mortgage payments and by posting the funds after the due date even though they had the money in hand prior to the due date, the trustee, overseeing Chapter 13 cases in Pittsburgh, claims in court papers.

Countrywide lawyers screamed and hollered and opposed having to open its books and records to examination and its officers to questioning - claiming the mistakes were human error and not part of a systemic plan to boost profits.

"The Trustee justifiably [questions] the integrity of the loan histories," Ronda J. Winnecour, the court-appointed trustee, Countrywide's chief protagonist, said in court papers.

Thomas and Maria Anne Balos, who have had money for their mortgage payments deducted from their paychecks and sent to Countrywide ever since they filed for bankruptcy, feel they may have been overcharged by Countrywide.

"I am very interested in the materials Countrywide is going to hand over and want to know if my clients have been billed for late charges or attorneys fees, because they shouldn't have," Michael S, JanJanin, the Balos' lawyer, told The Post on Friday.

Last Thursday, Countrywide short-circuited an order to hand over the materials by agreeing to do as much within 30 days.

Countrywide and its lawyers are also feeling the heat in Houston, where a judge will hold a hearing Dec. 12 to determine if the mortgage giant and its lawyers will be sanctioned for filing a motion for late fees.

The mortgage holder caught the mistake and Countrywide withdrew the motion. But not until the judge and trustee in the case became irked at the Countrywide pattern and ordered the mortgage company into court to explain its behavior.

To be sure, Countrywide, the nation's largest mortgage company, is not the only company being studied for possibly inflating fees. GMAC, Wells Fargo and others are also in the crosshairs of the U.S. Trustee, the arm of the Justice Dept. charged with overseeing the bankruptcy courts.

A study earlier this year by Katherine M. Porter, associate professor of law at the University of Iowa, revealed that collectively, mortgage companies could have padded their bottom lines by millions of dollars by inflating fees on mortgages held by folks in Chapter 13.

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