The Federal Trade Commission slapped a $108 million fine on Countrywide/Bank of America earlier this week. Tough investigative business journalism made that possible.
Newspapers like The New York Times don’t like to brag on themselves (something that’s unfortunate since it makes it easier to miss the importance of tough newspaper journalism) and competitors like The Wall Street Journal sure aren’t going to. So I will.
The Times‘s Gretchen Morgenson and Jonathan D. Glater wrote a piece two years ago on how Countrywide and other mortgage servicers were flattening borrowers with “grossly inflated” fees and “misled customers or bankruptcy court officials.”
The paper drops this down toward the bottom of its story today on how Countrywide settled the case:
The F.T.C. inquiry followed a March 2008 article in The New York Times that focused on mortgage servicing practices. The article highlighted the experience of Robin and John Atchley, a Georgia couple who were charged thousands of dollars in questionable fees by Countrywide after emerging from bankruptcy. The Atchleys were part of the F.T.C.’s presentation at a news conference here Monday.
Not exactly kissing the trophy there.
Countrywide/BofA settled for bilking 200,000 borrowers.
The company assessed the fees on customers who had sought to reorganize their debts and save their homes or on homeowners who, the company claimed, sometimes falsely, were in default on their loans.
The settlement only comes to an average $540 per borrower and only recovers what the FTC estimates Countrywide overcharged. Why don’t the federales come after these bad actors for punitive damages?
The good news here is that this may not be the end of it. There are possible federal criminal charges coming down the pike (emphasis mine):
Federal officials said those assertions could be followed up by the Federal Fraud Enforcement Task Force, an interagency group that includes the Justice Department, which, unlike the trade commission, can pursue a criminal case…
The F.T.C. and the United States Trustee Program, which enforces federal bankruptcy laws for the Justice Department, said that in numerous instances Countrywide misled customers or bankruptcy court officials.
Countrywide, always a class act. A predatory lender and a predatory servicer. If corporations are people, and Countrywide the corporation misled customers and court officials, it seems like Countrywide ought to face federal charges, no?
And remember that this is systematic wrongdoing. If you’re tempted by the blame-the-borrowers crowd, recall that Countrywide lied to customers and court officials and tried to squeeze money—at up to 400 percent markups—out of people already struggling to pay their mortgages.
The Journal, though it doesn’t acknowledge the NYT role in rooting out the story, does have a better lede, saying the firm “cheated hundreds of thousands of customers facing foreclosure on their homes.” The Times is less blunt, saying “the company overcharged customers who were struggling to hang onto their homes.” And the Journal‘s story overall is better, giving us context and detail than the NYT does. Here’s some:
Mr. Mozilo recently retained Washington white-collar criminal attorney Brendan V. Sullivan, leading some legal experts to believe that criminal charges may be imminent. Mr. Sullivan, of law firm Williams & Connolly, has represented high-profile defendants such as Col. Oliver North, former NYSE Chairman Richard Grasso and Sen. Ted Stevens in the past.
The Times, bizarrely, doesn’t mention Angelo Mozilo at all. Huh?
But the after-the-fact spot news story isn’t the important one. It’s the investigation that triggered it. And so we tip our hat to the Times, Morgenson, and Glater for a bigtime story.
— Further Reading:
Audit Interview: Gretchen Morgenson. “You’ve got to keep hammering.”
When Mozilo Met Morgenson: Regulators operate in a context, and that context is often established by journalists.
The Subprime Mess From Mount Olympus: Why James Grant’s long view comes up short.
Unsupported and Untrue: WSJ lacks evidence to support a sweeping, front-page claim against mortgage borrowers
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.