Bank of America to Pay $335 Million to Settle Countrywide Discrimination Lawsuit
Bank of America has agreed to pay $335 million to settle a federal government claim that its Countrywide Financial unit discriminated against minority borrowers during last decade’s mortgage boom.
According to the Los Angeles Times, the Justice Department’s suit resulted from Countrywide charging higher interest rates to black and hispanic home buyers than it did to white borrowers with similar incomes and credit scores.
The settlement is the largest of its kind in history.
The $335 million will be distributed to more than 200,000 victims of Countrywide’s discriminatory lending practices. Nearly a third of those people live in California.
According to the Justice Department, the average black Angeleno who borrowed $200,000 in 2007 paid $1,200 more in fees than a comparable white borrower.
The suit alleged that Countrywide portrayed itself as a friendly, open lender to people who otherwise might not qualify for loans. But in reality, the company was abusing the trust it forged with minority customers.
“Chances are the victims had no idea whatsoever they were being victimized,” Thomas E. Perez, head of the Justice Department’s civil rights division, told the Los Angeles Times. “They were thrilled to have gotten the loan and realized the American Dream. They had no idea they could have and should have gotten a better deal. This is discrimination with a smile.”
“This historic settlement sends a powerful message that financial institutions will be held accountable for targeting communities of color with unfair practices that have led to needless foreclosures,” Janis Bowdler of the National Council of La Raza, a Latino civil-rights organization, told the Los Angeles Times. “The findings in [the] DOJ’s investigation echo what we’ve been saying for years — deceptive lenders willfully preyed on Latinos and other minority borrowers, steering them to subprime mortgages even when they had good credit.”
Perez says that around two-thirds of Countrywide’s victims were Latino and that the company specifically targeted Spanish speakers.
“They understood marketing. They understood how to build trust,” she told the Times. “‘Se habla español,’ they said in Latino communities.”
Bank of America, which has endured a rather brutal year, was quick to point out that the abuses occurred before it acquired Countrywide in 2008.
“We reached this settlement to resolve issues about Countrywide’s alleged historic practices that occurred before Bank of America acquired the company,” spokesman Dan Frahm said in a statement. “Bank of America’s practices are not at issue.”
This settlement does not mark the end of Bank of America’s massive Countrywide headache. The megabank paid $2.5 billion for the mortgage lender, but the true price tag for the company could exceed $20 billion by the time all outstanding legal matters are settled.
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