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Real Estate

Countrywide faces foreclosure probe

Report says bankruptcy court regulator looking into whether mortgage lender is tacking on improper fees and charges to loans in foreclosure.

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NEW YORK (CNNMoney.com) -- Countrywide Financial, the nation's leading mortgage lender, is facing a federal probe into its foreclosure practices, according to a published report.

The New York Times reported Wednesday that the U.S. Trustee, the federal agency monitoring the bankruptcy courts, subpoenaed its records to determine if two foreclosures in southern Florida represented abuses of the bankruptcy system by the lender.

The agency, a part of the Justice Department, announced an effort to move against mortgage servicing companies that file false and inaccurate claims in foreclosure cases.

The paper says that in the two cases being examined borrowers who had filed for bankruptcy court protections objected to Countrywide's claims of what was owed on their home loans. One couple contended that their mortgage payments were current, while Countrywide (Charts, Fortune 500) claimed $2,400 in overdue mortgage payments in that case.

The paper reports that the U.S. Trustee took an interest in both matters after Countrywide did not respond to the borrowers' objections and judges in the cases ordered the lenders' claims for various fees stricken from the claims.

A Countrywide spokesman told the paper it does not comment on pending litigation, but added that it had intended to appear at the hearings and was investigating why its outside counsel did not do so.

Countrywide has filed objections to the U.S. Trustee's probe and subpoenas in both cases, the paper reported, saying that they were overly broad and exceeded the office's powers. But the bankruptcy judge hearing one of the cases has allowed the regulator's investigation to go forward.

The paper reports that Countrywide is not the only mortgage lender being accused of adding improper charges to loans made to people who have filed for bankruptcy protection.

A recent study of more than 1,700 foreclosure cases by University of Iowa law professor Katherine Porter showed that questionable fees had been added to almost half of the loans she examined, the paper reported.

In one case, the court found that Wells Fargo (Charts, Fortune 500), another major mortgage lender, assessed improper fees and charges that added more than $24,000 to a loan, or 12 percent more than the court determined was actually owed.

The paper said that Porter found another lender, which it did not identify, had claimed that a borrower owed more than $1 million when in fact the true balance was only $60,000. To top of page

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