BofA to pay $335M settlement for Countrywide discriminatory lending
LOS ANGELES (KABC) -- A record settlement of $335 million was reached Wednesday to settle claims that Countrywide Financial Corp. discriminated against black and Hispanic borrowers hoping to buy homes.
The U.S. Dept. of Justice department says California-based Countrywide Financial exploited the trust of minorities who were only reaching for the American Dream: home ownership.
Two-hundred-thousand people will get money back as part of the massive settlement.
This is the largest fair-lending settlement in U.S. history.
Black and Hispanic borrowers allegedly paid more than white borrowers who were equally qualified.
"California, which was the corporate headquarters for Countrywide, was clearly the epicenter of discriminatory activity," said Assistant U.S. Attorney General Thomas Perez.
The government says Countrywide Financial, which is now part of Bank of America, would steer African-American and Hispanic customers into sub-prime loans, even though they qualified for prime loans. The result is they paid more in fees and got higher interest rates.
"In 2007, a qualified African-American customer in Los Angeles borrowing $200,000 paid an average of roughly $1,200 more in fees than a similarly qualified white borrower," said U.S. Attorney General Eric Holder.
The government says this happened during the boom years between 2004 and 2007. About 200,000 customers were affected, and officials say many still don't realize what happened.
"They had no idea they could have and should have gotten a better deal," said Perez. "This is discrimination with a smile."
Countrywide was heavily involved in high-risk sub-prime mortgages and lost millions when the mortgage meltdown hit.
Last year the CEO of Countrywide, Angelo Mozilo, faced civil fraud and insider-trading charges. He settled without admitting or denying any wrongdoing.
"What's a true shame is that the former CEO of Countrywide isn't in jail," said Jaime Court, ConsumerWatchdog.org.
Court says those higher-rate loans forced some borrowers into foreclosure... In the settlement they will receive anywhere from a few hundred to several thousand dollars.
"It's a great step that this money is going back to the victims. But nothing can replace the fact that these people have largely lost their homes because they were forced into high-interest rate loans they couldn't afford simply because of the color of their skin," said Court.
In a statement, Bank of America Spokesman Dan Frahm said Wednesday: "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."
Bank of America, which was not named in the investigation, did shut down Countrywide's practices when it acquired the company in 2008.
department of justice, national news, carlos granda
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