After a blistering take on what he called a “vulture mentality” among servicers last week, Senator Charles Schumer (D-NY) on Wednesday urged the Federal Trade Commission to open an investigation into “an emerging of pattern of apparent misconduct by Countrywide Financial Corporation involving its behavior with regard to debtors during bankruptcy.” Critics allege that Countrywide Financial (CFC) is willfully attempting to harm debtors in post-petition Chapter 13 repayment plans, adding hidden fees and misapplying borrower’s payments that put them back at foreclosure’s doorstep. In testimony last week, Countrywide’s loan servicing director Steve Bailey acknowledged mistakes, but argued that the number of mistakes were small — less than 1 percent of Chapter 13 filings — and that none were due to willful misconduct by the nation’s largest mortgage servicer. The testimony before the Senate Judiciary Subcommittee on Administrative Oversight and the Courts clearly did little to change Schumer’s mind. “An investigation by the Federal Trade Commission would help pull the curtain back on a hidden corner of the existing foreclosure crisis, and could help stem the tide of homeowners who are now unnecessarily being forced into bankruptcy and foreclosure,” he wrote in a letter sent to FTC Chairman William E. Kovacic on May 14. Public audits of borrower defaults Schumer also wrote a separate letter to Countrywide CEO Angelo Mozilo and President David Sambol demanding that the audit’s results referred to by Bailey in his testimony be made public. In the same letter, Schumer inquired about whether any action had been taken against Countrywide employees involved in the documented abuses. Signaling potentially broader inquiries in the future, Schumer also suggested that Countrywide was adding “unsubstantiated, undocumented, and perhaps illegal fees” to delinquent borrowers not in bankruptcy as well, and asked that Countrywide extend its audits to all defaults Additionally, Schumer said he is considering the introduction of legislation that would solidify the authority of the U.S. Trustee’s office to investigate bad actors, and dramatically increase the penalties and sanctions on lenders that skirt bankruptcy law. Disclosure: The author was long CFC when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.