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March 8, 2008

UST Complaint Against Countrywide

The US Trustee filed a complaint against Countrywide on February 28, 2008 alleging various abusive and improper conduct in a particular chapter 13 case in Atlanta.  A copy of the complaint can be accessed here.   The complaint alleges that Countrywide filed two motions for relief that it ultimately withdrew because the debtor was not in fact late, it added unsubstantiated charges to its claim, and continued to accept payments from the chapter 13 trustee after it had been paid in full. 

The prayer for relief asks for:

a. imposing appropriate monetary sanctions against Countrywide;
b. enjoining and restraining Countrywide from engaging in bad faith and abusive practices in connection with: (i) its preparation, verification, filing and prosecution of pleadings and proofs of claims in bankruptcy cases; (ii) its identification and return of payments received from bankruptcy estates after the satisfaction of its claim; and (iii) its assessment and disclosure of contractual fees and escrow charges.

I tease my students all the time about "bad faith."  I tell them they cannot utter those words in my classroom and will get an F if the words show up on a test.  So Countrywide is going to be ordered not to do bad faith or "abusive" stuff?  It seems like this is straight from a Remedies I course.  How is the court going to enforce that?  Aren't you going to give every debtor a free shot at Countrywide any time they do anything the debtor doesn't like?

I will probably lose my membership in the consumer bankruptcy bar for this post.  I think Countrywide and the like should be beat up big time for their conduct but I'm uncomfortable with an injunction ordering them not to do bad faith stuff in the future.  The injunction language should be considerably more specific than this or simply sanction them until they change their tune. 

Judge Jeff Bohm in Houston has conducted lengthy evidentiary hearings over several months on the same issues with Countrywide in a case called In re Parsley.  His March 5, 2008 Memorandum, all 73 pages, can be accessed here (first part) and here.  It takes no talent to see that Judge Bohm was more than miffed at the practice of bringing Motions for Relief, completed by paralegals, and then withdrawing them when confronted with the truth about the status of the particular loan.  The end result however is no sanctions because Judge Bohm said that he could not find "clear and convincing" evidence against Countrywide and no sanctions against the attorneys although he "hoped" they would do a better job in the future.  I can't say I disagree with the result.  Putting Countrywide through this has to help the plight of debtors and debtors' counsel in the future.         

March 8, 2008 in Current Affairs | Permalink


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Does anyone know the debtor names or docket number for the Ohio case referenced in the complaint filed in Georgia?? I'm looking for that complaint and am having no luck. Thanks!!

Posted by: Jackie Mallett | Mar 14, 2008 10:42:37 AM

I just received a credit update informing me that Countrywide has posted a derrogoratory note on my credit report. They claim that I have not payed my mortgage for the past two months. I have, and well within the grace period. I have access my Bank accounty electronically and it shows that both checks have been cashed well within the grace period. They have damaged my credit score. This is the most unprofessional company. I plan to continue to file complaints with the US Consumer Reports, and any other organization set up to see these people.

Posted by: maria formoso | Jun 22, 2008 8:16:35 AM

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