Credit Slips own Katie Porter is the subject of a front-page article in today’s N.Y. Times. The article discusses Porter’s recent paper on mortgage claims in bankruptcy cases. Porter found questionable fees added to more than half of the claims and found significant discrepancies between what the bank and the debtor claimed were owed. Fees such as a "fax fee" or demand fee" were added to claims Porter found. In some egregious cases, banks also claimed to be owed far more than was actually due.
Although Porter’s paper studies claims made in bankruptcy cases, I think it has broader implications for consumers. There is no reason to think these errors are not made systematically across the mortgage industry. In bankruptcy court, the claims are made in an adversarial setting and subject to scrutiny by the court and the debtor’s lawyer. If overcharges are commonly occurring in the bankruptcy system, they are likely occurring across a much broader spectrum of claims.
UPDATE (11/6/07): Professor Porter’s paper can be accessed on SSRN here.
Comments
3 responses to “A $50 Fee There, a $75 Fee There, and Soon It Adds Up to Real Money”
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Ed, thanks for your comment. Angie Littwin made similar points in a post about paper she posted on SSRN. Angie’s post is here: http://www.creditslips.org/creditslips/2007/03/for_great_credi.html. Note, in the comments, Angie reports that SSRN contacted her and took down the ads she found objectionable. For me, it’s a tough issue. On the one hand, SSRN provides a valuable public service for which advertisements defray the costs. On the other hand, SSRN authors may find their papers shilling for products and services they find objectionable.
It appears that Countrywide has developed a strategy of using class actions to wipe out its liability for various illegal fees it levies when a loan is taken out and while it is being serviced and paid off.
I base this on my own experience as a Countrywide borrower who has now been involved in four settled class actions over the one loan. In each of actions Countrywide either “paid” worthless coupons to the class members or very little cash with a variety of barriers to actually making a claim.
One loan, four class actions. Wonder if that can be the new Countrywide marketing slogan?