The Justice Department on Wednesday announced the largest residential fair-lending settlement in history, saying that Bank of America had agreed to pay $335 million to settle allegations that its Countrywide Financial unit discriminated against black and Hispanic borrowers during the housing boom.
A department investigation concluded that Countrywide had charged higher fees and rates to more than 200,000 minority borrowers across the country than to white borrowers who posed the same credit risk. It also steered more than 10,000 minority borrowers into costly subprime mortgages when white borrowers with similar credit profiles received prime loans, the department said.
The pattern and practice covered the years 2004 to 2008, before Countrywide was acquired by Bank of America.
“The department’s actions against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for discrimination,” Attorney General Eric H. Holder Jr. said. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin.”
Dan Frahm, a Bank of America spokesman, stressed that the allegations were focused on Countrywide’s conduct before Bank of America purchased it in 2008.
“We are committed to fair and equal treatment of all our customers, and will continue to focus on doing what’s right for our customers, clients and communities,” he said. “We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues.”
The Justice Department had been examining whether Countrywide used unfair lending practices during the heyday of the housing boom, including charging higher fees and rates to Hispanic and African-American mortgage applicants than to white applicants who had the same qualifications.
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4 Responses
The settlement as reported above works out to only $1,675 per borrower. That sounds like a small fraction of the damage actually done.
“The department’s actions against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for discrimination,” Attorney General Eric H. Holder Jr. said. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin.”
I agree Mr. Holder, and so should you make decisions also on the ‘creditworthiness’ of each case and not on the color of skin! (Like when it’s reverse discrimination.)
Absolutely horrific. They forgot a few zeros in that penalty.
I find this suit and settlement funny. The government sues banks for not lending to people who are not credit worthy. Then blames them when the sub prime crisis implodes because banks lent to people who were not credit worthy.
Typical.
SK