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Wed December 21, 2011
BofA's Countrywide To Pay $335 Million, Settling Lending Discrimination Case
The Justice Department is calling it the "largest residential fair lending settlement in history:" Bank of America's Countrywide Financial has agreed to pay $335 million to settle a lawsuit that claimed it discriminated against black and Latino borrowers.
The Justice Department alleges that Countrywide charged a higher interest rate on the mortgages of more than 200,000 minority borrowers, despite the fact that their creditworthiness was comparable to whites who received lower rates. Justice adds that in some cases, Countrywide steered minorities toward subprime loans when they in fact qualified for a traditional loan.
In its press release, the Justice Department adds:
"The complaint further alleges that Countrywide was aware the fees and interest rates it was charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it.
"'Countrywide's actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,' said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division."
Under the settlement, an independent administrator will contact and distribute compensation to those the Justice Department determined were victims of unfair lending practices.
The New York Times, which reported on the settlement before the official announcement was made, said a Bank of America spokesman said the alleged misconduct happened before BofA's acquisition of Countrywide.
The Times adds some background:
"Under federal civil rights laws — including the Fair Housing and Equal Credit Opportunity acts — a lending practice is illegal if it has a disparate impact on minority borrowers. Amid the housing boom, the Justice Department brought relatively few enforcement actions based on fair lending laws under the Bush administration.
"But against the backdrop of the foreclosure crisis, the Obama administration has made a major effort to step up enforcement of fair lending laws. In January 2010, the division created a unit to focus exclusively on banks and mortgage brokers suspected of discriminating against minority mortgage applicants, a type of litigation that requires extensive and complex analysis of data. It also reached an agreement to gain access to data the Treasury Department is collecting from banks about loan modifications for people seeking to avoid foreclosure."
The settlement agreement must still be approved by a court.