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.
Update at 5:11 p.m. ET. 'Settlement Echoes What We've Be Saying For Years':
The National Council of la Raza said it welcomed the settlement agreement, saying it confirms what the organization "has been saying for years."
"For the thousands of families that have lost their homes at the hands of predatory lenders, this settlement is a welcome and much-deserved Christmas present," Janis Bowdler, director of the Wealth-Building Policy Project at NCLR said in a statement. "We hope this is the first of a series of enforcement actions by the Obama administration to hold predatory lenders accountable."
NCLR also points to some interesting figures from Center for Responsible Lending, which has found that borrowers of color were "twice as likely to receive subprime loans" than their white counterparts and now that the housing bubble has burst, borrowers of color "are more than twice as likely to lose their home as white households."
Update at 4:03 p.m. ET. Statement From Bank of America:
Dan Frahm, a Bank of America spokesman, sent us a statement that reads in part:
"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. 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."
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