Bank of America recently agreed to pay $335 million to resolve allegations that its Countrywide unit engaged in a widespread pattern of discrimination against qualified African-American and Hispanic borrowers on home loans. The lawsuit was brought by the United States Department of Justice (“DOJ”). The DOJ says it’s the largest settlement in history over residential fair lending practices.
According to the DOJ’s complaint, Countrywide charged over 200,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers with a similar credit profile. The complaint says that these borrowers were charged higher fees and rates because of their race or national origin rather than any other objective criteria.
The United States’ complaint says that Countrywide was aware that the fees and interest rates that its loan officers were charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it.
By steering borrowers into subprime loans from 2004 to 2007, the
complaint alleges, Countrywide harmed those qualified African-American
and Hispanic borrowers. Subprime loans generally carried costlier terms,
such as prepayment penalties and significantly higher adjustable
interest rates that increased suddenly after two or three years, making
the payments unaffordable and leaving the borrowers at a much higher
risk of foreclosure.
The settlement amount will be used to
compensate victims of Countrywide’s discriminatory mortgage loans from
2004 through 2007, when Countrywide originated millions of residential
mortgage loans as the nation’s largest single-family mortgage lenders.