Firm Heeds Critics.

Washington -- Countrywide Financial Corp. said it is improving the way it services mortgages for homeowners in bankruptcy after U.S. trustees have raised concerns about its servicing practices and the fees it charges those borrowers who are seeking to restructure their debts and avoid foreclosure.

The Calabasas, Calif.-based company said it is implementing a three-point program that includes adopting "certain" best practices recommended by the National Association of Chapter 13 Trustees.

The giant servicer has arranged for an outside auditor to review a sample of loans in bankruptcy. This review will focus on pre- and post-petition filing and accounting for plan payments, CFC chief loan administrator Steve Bailey told a Senate panel last week.

Countrywide also is setting up a bankruptcy ombudsman's office so borrowers and their counsel get a high-level review of any discrepancies in the amount of mortgage debt due and any servicing fees.

Countrywide services 65,000 loans with borrowers in bankruptcy and Mr. Bailey testified that mistakes are made but internal reviews show minimal instances of errors.

Senate Judiciary Subcommittee chairman Charles Schumer, D-N.Y., pointed out that a U.S. trustee is reviewing 300 loans before the U.S. Bankruptcy Court in Pittsburgh, which suggests a higher error rate.

Sen. Schumer also expressed concerns that servicers like Countrywide ...