Panel to examine Countrywide, bankruptcy

WASHINGTON (Reuters) - Countrywide Financial Corp, which is being investigated for its treatment of some foreclosed homeowners in bankruptcy court, will testify on Tuesday at a U.S. Senate panel hearing, a senior Democratic senator said on Wednesday.

Countrywide is the target of a federal probe over accusations it piled on improper fees, initiated foreclosures too soon and ignored court orders in several cases involving borrowers who filed for bankruptcy protection, Sen. Charles Schumer, a New York Democrat, said in a statement.

The hearing will investigate allegations "that mortgage lenders like Countrywide have abused the bankruptcy system." however, Countrywide is only company scheduled to testify at the hearing.

Schumer said his Senate judiciary subcommittee would hear testimony from Steve Bailey, head of Countrywide's loan servicing division, and from a Justice Department official at the hearing. Also testifying will be a University of Iowa professor who has studied fees imposed by lenders on borrowers in bankruptcy.

Countrywide is the largest U.S. mortgage lender and has agreed to be acquired by Bank of America Corp. Countrywide officials were not immediately available for comment.

Millions of U.S. borrowers, mostly those with little or poor credit history, are expected to lose their homes over the next two years as a result of interest rates sharply jumping from initial low rates.

Schumer said he is considering legislation to expand the authority of the U.S. trustee's office and increase penalties for "bad-actor" lenders who skirt the bankruptcy law.

Earlier this month, a federal bankruptcy judge in Pittsburgh said the U.S. Trustee, an arm of the Justice Department that oversees bankruptcy cases, had the authority to investigate whether Countrywide abused the bankruptcy process. The trustee there alleged misconduct by Countrywide in 293 separate cases, according to the judge's ruling.

(Additional reporting by Alexandria Sage in Los Angeles)

(Reporting by John Poirier; editing by Carol Bishopric)