Bank of America agreed to pay $108 million to settle FTC charges that its subsidiary, Countrywide Financial (acquired by BofA in 2008) engaged in abusive mortgage practices. Wyatt, Countrywide Pays $108 Million to Settle Fees Complaint, NY Times, Jun. 7, 2010. The case involved charging excess fees for homeowners in default, such as hiring its own subsidiary to do property maintenance at excessive rates or imposing new charges on homeowners who had been in bankruptcy (where mortgage loans still cannot be modified), and sometimes claiming homeowners were in default when they were not, with all the problems that a default can bring on. According to the FTC Chair Leiboweitz, “Countrywide profited from making risky loans to homeowners during the boom years, and then profited again when the loans failed.” Id.
The money will go to the 200,000 homeowners who had mortgages before the 2008 sale to Bank of America.
Like so much else connected with the mortgage meltdown and financial crisis, this case demonstrates the problem that Congress has still not acted to pass a mortgage cramdown provision that would allow bankruptcy judges to modify home mortgages. The only reason not to pass such a provision is to protect the profits of banks, and that simply isn't a sufficient rationale.