More federal bankruptcy judges are calling into question the business practices of Countrywide Financial Corp., as Bank of America Corp. prepares to buy the ailing mortgage lender, the Wall Street Journal reports.


According to court documents in a bankruptcy case in Houston, Countrywide didn't properly credit a borrower's payments made during bankruptcy but instead applied them to prebankruptcy debt, which isn't allowed. In the same case, involving a debtor named William Allen Parsley, Countrywide represented to the court that Mr. Parsley owed fees that turned out to be unsubstantiated and in error. These included an improper $450 fee and a $65 unsubstantiated fee.


During a hearing last month, U.S. Bankruptcy Judge Jeff Bohm chastised Countrywide and its lawyers after the company admitted making numerous errors in the case. "How many times do I have to listen to that before I conclude, 'You know, there's got to be some kind of reckoning' when I keep hearing time after time, 'we made a mistake, we made a mistake, we made a mistake, we made a mistake?'" Judge Bohm said. He is considering sanctions against the company.


Countrywide says it has incurred at least $400,000 in costs associated with the case after having its employees deposed by the U.S. Trustee Program, a division of the Justice Department that oversees the bankruptcy system. The agency has been investigating the company's handling of loan payments and court claims in cases across the country.


In Miami, Bankruptcy Judge A. Jay Cristol last month approved a U.S. trustee's requests to subpoena and depose Countrywide to obtain information about how it made mistakes in a case. Initially, the company claimed in court that the borrower would need to pay $4,800 a month for a mortgage during bankruptcy. But after the borrower objected, Countrywide said it had erred and reduced its claim to about $2,400 a month. In a hearing in December, Judge Cristol said Countrywide had been found "with its hand in the cookie jar."


Countrywide has said it was investigating what happened in the case.


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