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Federal Trade Commission v. Countrywide Home Loans

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA


March 22, 2012

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
COUNTRYWIDE HOME LOANS, INC., A CORPORATION, AND BAC HOME LOANS SERVICING, LP, A LIMITED PARTNERSHIP, DEFENDANTS.

SUPPLEMENTAL CONSENT JUDGMENT AND ORDER

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), and Defendant, BAC Home Loans Servicing, LP ("BAC Home Loans"), jointly stipulate to this Supplemental Consent Judgment and Order ("Supplemental Order"), which resolves Plaintiff's allegation that BAC Home Loans violated the Consent Judgment and Order ("Consent Order") entered by this Court on June 15, 2010. BAC Home Loans received notice of the Consent Order on June 17, 2010.

NOW THEREFORE IT IS HEREBY ORDERED AS FOLLOWS:

FINDINGS

A. This Court has jurisdiction over the subject matter of this case and over BAC Home Loans.

B. Venue in this district is proper under 28 U.S.C. § 1391(b) and (c), and 15 U.S.C. § 53(b).

C. The Court finds that entry of this Supplemental Order is in the public interest.

D. Effective July 1, 2011, and after proper notice was provided to the FTC, BAC Home Loans merged with and into Bank of America, N.A., an entity not subject to the Consent Order and exempt from the FTC's jurisdiction. Therefore, upon entry of this Supplemental Order, all prospective injunctive provisions and other prospective requirements of the Consent Order shall terminate as to BAC Home Loans.

E. From June 17, 2010, through June 30, 2011, the Consent Order, inter alia, prohibited BAC Home Loans from: (1) making misrepresentations about the Status of Loans or amounts owed on Loans (Paragraph I.A); (2) assessing and/or collecting any Fee for a service unless it is (a) authorized and Clearly and Prominently disclosed by the Loan Instruments and not prohibited by law, (b) expressly permitted by law and not prohibited by the Loan Instruments, or (c) for a service requested by a consumer after disclosure and consent (Paragraph II); (3) assessing and/or collecting title Fees that were not Clearly and Prominently disclosed on BAC Home Loans' Fee Schedule (Paragraph V); (4) initiating foreclosure actions or assessing Fees in connection with an actual or threatened foreclosure action prior to the review of Competent and Reliable Evidence demonstrating that the consumer is in default under the terms of the Loan (Paragraph VI); (5) consummating foreclosure sales without having investigated non-frivolous disputes by consumers (Paragraph VI); (6) filing proofs of claim in connection with consumers' Chapter 13 Bankruptcy proceedings without providing copies of Loan Instruments and a detailed itemization of all amounts claimed (Paragraph VII); (7) Servicing Loans without an adequate data integrity program in place (Paragraph XI); and (8) failing to provide all information reasonably required to administer redress within thirty (30) calendar days of a written request by the Commission (Paragraph XIV).

F. The FTC alleges that, during the period from June 17, 2010, through June 30, 2011, BAC Home Loans has violated the provisions of the Consent Order enumerated in Paragraph E, as follows: 1. BAC Home Loans misrepresented amounts owed on Loans in violation of Paragraphs I.A and VI of the Consent Order through the submission to courts, and service on consumers, of affidavits that contained Fees unsupported by Competent and Reliable Evidence; 2. BAC Home Loans also misrepresented the status of Loans in violation of Paragraph I.A of the Consent Order by improperly completing foreclosure sales where a material change in the circumstances, such as a short-sale, loan modification, or bankruptcy, had occurred before the sale was completed; 3. BAC Home Loans assessed and/or collected Fees for Default-Related Services that were not authorized and Clearly and Prominently disclosed by the Loan Instruments and/or not permitted by law in violation of Paragraph II of the Consent Order; 4. BAC Home Loans assessed and/or collected title Fees that were not Clearly and Prominently disclosed on BAC Home Loans' Fee Schedule in violation of Paragraph V of the Consent Order; 5. BAC Home Loans filed proofs of claim in Chapter 13 Bankruptcy actions against consumers without attaching copies of the Loan Instruments in violation of Paragraph VII of the Consent Order; 6. BAC Home Loans serviced Loans in Bankruptcy without an adequate data integrity program, including without sufficient data integrity to ensure the accuracy of post- petition payment amounts, interest amounts, and total amounts, included in proofs of claim filed in Chapter 13 bankruptcy actions, in violation of Paragraph XI of the Consent Order; and 7. BAC Home Loans failed to provide all information reasonably required to administer redress, in violation of Paragraph XIV of the Consent Order, which required BAC Home Loans to provide that information within 30 days of the Consent Order's entry. Specifically, on June 22, 2010, the Commission requested information from BAC Home Loans that would enable the Commission to determine the identities of consumers entitled to redress and the amounts necessary to compensate those consumers. BAC Home Loans did not provide complete and accurate information in response to that request until May 2011.

G. BAC Home Loans does not admit to any of the allegations set forth herein, and entry of this Supplemental Order is not an admission of any such allegations of wrongdoing or violation of law. Nonetheless, BAC Home Loans stipulates and agrees to entry of this Supplemental Order to settle and resolve these disputes. H. BAC Home Loans waives: (a) all rights to seek appellate review or otherwise challenge or contest the validity of this Supplemental Order; (b) any claim BAC Home Loans may have against the Commission, its employees, representatives, or agents that relate to the matter stated herein; (c) all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996); and (d) any rights to attorneys' fees that may arise under said provision of law.

I. The parties, by and through their counsel, have agreed that entry of this Supplemental Order resolves all matters in dispute between them concerning Defendants' compliance with the Consent Order up to the date of entry of this Supplemental Order. All claims by the FTC against BAC Home Loans related to the Consent Order shall be settled and resolved, and the FTC relinquishes and releases any right it may have to bring any further enforcement action under the Consent Order as to BAC Home Loans, except as provided below.

DEFINITIONS

For purposes of this Supplemental Order, the following definitions shall apply:

1. "BAC Home Loans" shall mean BAC Home Loans Servicing, LP, formerly doing business as Countrywide Home Loans Servicing, LP, and its successors and assigns, by whatever names they might be known, but not including any Bank. Effective July 1, 2011, BAC Home Loans Servicing, LP merged with and into Bank of America, N.A., an entity not subject to the Consent Order and exempt from the FTC's jurisdiction. For purposes of this Supplemental Order only, Bank of America Corporation agrees to assume the obligations of BAC Home Loans Servicing, LP, solely with respect to any monetary liability arising from alleged violations of Home Loans of the Consent Order from June 17, 2010, through June 30, 2011.

2. "Bank" shall mean a bank that is exempt from the FTC's jurisdiction pursuant to Section 5(a)(2) of the FTC Act, 15 U.S.C. § 45(a)(2), including Bank of America, N.A. "Bank" shall not include any Person or entity controlled directly or indirectly by a bank that is not itself a bank, such as an operating subsidiary or Affiliate of a bank that is not itself a bank.

3. "First Declaration" shall mean the declaration made pursuant to Paragraph I.E of this Supplemental Order.

4. "Second Declaration" shall mean the declaration made pursuant to Paragraph I.F of this Supplemental Order.

I. MONETARY RELIEF

IT IS HEREBY ORDERED that, in view of the FTC's allegations that BAC Home Loans assessed and/or collected Fees of thirty-six million, one hundred thousand and thirty-four dollars ($36,100,034) in violation of the Consent Decree, and BAC Home Loans' representation in the First Declaration that it has remediated twenty-eight million, forty-two thousand and twenty-four dollars ($28,042,024) of such Fees, resulting in unremediated consumer losses of up to eight million, fifty-eight thousand, and ten dollars ($8,058,010):

A. Judgment is entered in the amount of eight million, fifty-eight thousand, and ten dollars ($8,058,010) to be paid by and through Bank of America Corporation to compensate consumers for losses sustained as a result of BAC Home Loans' alleged violations of Paragraphs I.A, II, V, VI, VII, and XI of the Consent Order.

B. From June 17, 2010, through June 30, 2011, BAC Home Loans, as set forth in the First Declaration, assessed and/or collected Fees of thirty-six million, one hundred thousand and thirty-four dollars ($36,100,034) that the FTC alleges caused violations of Paragraphs II and V of the Consent Order, as set forth in the allegations in Paragraphs F.3 and F.4 of the Findings section. This includes Fees BAC Home Loans assessed and/or collected for Default-Related Services that the FTC alleges are prohibited by the Consent Order, including:

1. Title Fees that the FTC alleges were not Clearly and Prominently disclosed on BAC Home Loans' Fee Schedule in violation of Paragraph V of the Consent Order; and

2. Fees for Default-Related Services that the FTC alleges were not authorized and Clearly and Prominently disclosed by the loan instruments and/or not permitted by law, in violation of Paragraph II of the Consent Order.

C. As set forth in the First Declaration, BAC Home Loans has remediated twenty-eight million, forty-two thousand and twenty-four dollars ($28,042,024) of the Fees set forth in Paragraph I.B by reversing or refunding all such Fees that were assessed to and/or collected from any consumers.

D. BAC Home Loans shall satisfy the judgment in Paragraph I.A by providing to the FTC the First Declaration required by Paragraph I.E and the Second Declaration required by Paragraph I.F that collectively demonstrate it met each of the following conditions:

1. Compensated consumers for all Fees BAC Home Loans assessed and/or collected for Default-Related Services that the FTC has identified and alleges were prohibited by the Consent Order, from June 17, 2010, through June 30, 2011, including:

a. Title Fees that the FTC alleges were not Clearly and Prominently disclosed on BAC Home Loans' Fee Schedule;

b. Fees for Default-Related Services that the FTC alleges were not authorized and Clearly and Prominently disclosed by the loan instruments and/or not permitted by law.

c. Such compensation shall include, at a minimum, reversal or refund of all such Fees for all consumers. Refund checks shall be valid for at least one hundred and eighty (180) days from mailing. If BAC Home Loans or its successor is notified that any checks are undeliverable to a borrower, BAC Home Loans or its successor shall follow the procedures for the delivery of refund checks described in the Subparagraph I.E.2;

2. Made all payments, directly or through its successor, into an interest bearing escrow account as required by Paragraph III.3 of the Consent Judgment filed in United States v. Bank of America Corporation, CV 12-00361 (D.D.C.) (attached as Exhibit A); provided, however, that, if the proposed Consent Judgment filed in United States v. Bank of America Corporation, CV 12-00361 (D.D.C.), is not approved and ordered by that Court within ninety (90) days of entry of this Supplemental Order, then the requirement of this Subparagraph I.D.2 shall not be a necessary condition for BAC Home Loans to satisfy the Judgment in Paragraph I.A; and

3. Complying with the payment requirements of the remediation program administered pursuant to Paragraphs 16, 19-25 of the Consent Order entered in the matter of United States v. BAC Home Loans Servicing, CV 11-04534 (C.D. Cal. May 31, 2011) (the "SCRA Consent Order" attached as Exhibit B).

E. BAC Home Loans provided the FTC with a First Declaration, sworn to under penalty of perjury, on February 16, 2012 explaining those steps it undertook to comply with Paragraph I.D.

1. The First Declaration described in detail BAC Home Loans' process for the compensation referenced in Paragraph I.D above, completed through February 1, 2012 including, but not limited to:

a. The means used to identify borrowers eligible for a reversal or refund of Fees;

b. The means used to notify borrowers that they were entitled to a reversal or refund

of Fees, including a sample copy of any notification sent to borrowers;

c. The number of loan accounts eligible to receive a reversal or refund of a Fee;

d. The number of loan accounts that received a reversal of a Fee and the number that received a refund of a Fee; and

e. The total dollar amount of Fees identified for reversal and the total amount identified for refund.

2. The First Declaration also certified that BAC Home Loans or its successor followed the procedures below for the delivery of refund checks:

a. Mail all refund checks by first class mail to the last known address on the system of record for each relevant borrower with forwarding service requested;

b. Make each refund check issued valid for at least 180 days from mailing;

c. If any refund check is returned, use the telephone number in the system of record to contact the borrower and secure a correct address; and

d. If efforts to contact the borrower by phone are unsuccessful, after 180 days from the date the check was issued, turn over the unclaimed funds to the escheatment process in compliance with applicable state laws and regulations regarding unclaimed property.

3. The First Declaration also provided documentation in an electronic format specified by the FTC for all compensation reversals or refunds, completed through February 1, 2012, which was sufficient to identify for each reversal or refund:

a. the loan number for the loan assessed the Fee;

b. the type of Fee;

c. the amount of Fee; and

d. the total amount reversed and the total amount refunded.

4. The FTC has accepted this First Declaration as satisfying the requirements of this Paragraph I.E.

F. Within one hundred and eighty (180) days from entry of this Supplemental Order, BAC Home Loans shall provide to the FTC a Second Declaration, sworn to under penalty of perjury,

confirming that:

1. The reversal and refund process described in the First Declaration has been completed;

2. BAC Home Loans or its successor followed the procedures described in Subparagraph

I.E.2 for the delivery of refund checks;

3. All payments into an interest bearing escrow account as required by Paragraph III.3 of the Consent Judgment filed in United States v. Bank of America Corporation, CV 12- 00361 (D.D.C.), have been made on behalf of Bank of America Corporation; provided, however, that, if the proposed Consent Judgment filed in United States v. Bank of America Corporation, CV 12-00361 (D.D.C.), is not approved and ordered by that Court within ninety (90) days of entry of this Supplemental Order, then the Second Declaration required by this Paragraph I.F need not include the confirmation called for in this Subparagraph I.F.3; and

4. BAC Home Loans or its successor has complied with all payment requirements due as of the date of the Second Declaration for the remediation program administered pursuant to Paragraphs 16, 19-25 of the SCRA Consent Order.

G. After submission of the Second Declaration described in Paragraph I.F, only with respect to remediation completed after February 1, 2012, BAC Home Loans must provide upon written request from the FTC, as needed to determine compliance with the Supplemental Order, documentation for specific payments identified by the FTC, or a random sampling of payments chosen by the FTC. Such documentation must be provided in an electronic format specified by the FTC and within thirty (30) days of receipt of the FTC's written notice. The documentation must be sufficient to identify for each payment:

1. the loan number for the loan assessed the Fee;

2. the type of Fee;

3. the amount of Fee; and

4. the total amount reversed or refunded.

H. After providing the Second Declaration required by Paragraph I.F, within one (1) year after entry of this Supplemental Order, BAC Home Loans shall move the Court for an order: (a) certifying that BAC Home Loans has complied with Paragraphs I.D, I.E, I.F, and I.G; and (b) terminating the Consent Order as to BAC Home Loans and this Supplemental Order. In moving for such an order, BAC Home Loans must demonstrate that it has met all of the conditions of Paragraph I.D, including, but not limited to, reversing or refunding all prohibited Fees for all consumers and making all payments required by the Consent Judgment filed in United States v. Bank of America Corporation, CV 12-00361 (D.D.C.), and by the SCRA Consent Order; provided, however, that if the proposed Consent Judgment filed in United States v. Bank of America Corporation, CV 12- 00361 (D.D.C.) is not approved and ordered by that Court within ninety (90) days of entry of this Supplemental Order, then payments under the proposed Consent Judgment filed in United States v. Bank of America Corporation, CV 12-00361 (D.D.C.), are not required under this Supplemental Order. The FTC shall have 30 days to object to the motion and submit a memorandum explaining why the order should not be issued.

I. In addition to the judgment entered pursuant to Paragraph I.A of this Supplemental Order, judgment is entered against BAC Home Loans in the amount of one hundred and thirty thousand dollars ($130,000.00), to be paid by and through Bank of America Corporation, to compensate for BAC Home Loans' violations of Paragraph XIV of the Consent Order. On or before five (5) business days after the date of entry of this Supplemental Order, BAC Home Loans, by and through Bank of America Corporation, shall wire transfer the sum of one hundred and thirty thousand dollars ($130,000.00) to the Commission or such agent as the Commission may direct, pursuant to the instructions provided by the Commission. All funds paid pursuant to this Supplemental Order shall be deposited into a fund administered by the Commission or its agent to be used to compensate consumers for injury associated with violations of Paragraph XIV of the Consent Order. In the event that direct redress to consumers is wholly or partially impracticable or funds remain after redress is completed, any remaining funds shall be deposited as equitable disgorgement into the United States Treasury. BAC Home Loans shall have no right to challenge the FTC's choice of remedies under this Paragraph.

II. RETENTION OF JURISDICTION

(Supersedes Paragraph XX of the Consent Order)

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes

of construction, modification, and enforcement of the Consent Order and this Supplemental Order.

IT IS SO ORDERED.

DATED: _______________ ____________________________________

UNITED STATES DISTRICT JUDGE

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, et al., Plaintiffs, v. BANK OF AMERICA CORP. et al., Defendants.

Civil Action No. ________

CONSENT JUDGMENT

WHEREAS, Plaintiffs, the United States of America and the States of Alabama, Alaska,

Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii,

Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota,

Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,

New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South

Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming,

the Commonwealths of Kentucky, Massachusetts, Pennsylvania and Virginia, and the District of

Columbia filed their complaint on March 12, 2012, alleging that Bank of America Corporation,

Bank of America, N.A., BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans

Servicing, LP, Countrywide Home Loans, Inc., Countrywide Financial Corporation,

Countrywide Mortgage Ventures, LLC, and Countrywide Bank, FSB (collectively, for the sake

I. JURISDICTION

II. SERVICING STANDARDS

III. FINANCIAL TERMS

Payment Settlement Amounts.

Payments to Foreclosed Borrowers.

Consumer Relief.

V. RELEASES

VI. SERVICEMEMBERS CIVIL RELIEF ACT

VII. OTHER TERMS

For the Iowa Division of Banking:

For the State of Iowa:

JAMES M. SCHIPPER Superintendent of Banking Iowa Division of Banking 200 E. Grand Ave., Ste. 300 Des Moines, IA 50309-1827 Tel: 515- 242-0350 Fax: 515-281-4862 THOMAS J. MILLER Attorney General 1305 E. Walnut St.

Des Moines, IA 50319 Tel: 515-281-5164 Fax: 515- 281-4209

20120322

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