WASHINGTON (FinalCall.com) – While the housing crisis has no end in sight, Countrywide borrowers got some satisfaction as the year ended with the largest residential fair lending suit in history as Bank of America agreeing to pay $355 million to settle allegations that Countrywide Financial used racist tactics against Black and Latino borrowers.
The settlement was filed Dec. 21, by the Department of Justice in conjunction with the department’s complaint that Countrywide discriminated by charging more than 200,000 Black and Latino borrowers higher fees and interest rates than non-Latino White borrowers in retail and wholesale lending.
“The department’s action against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for lending discrimination,” said Attorney General Eric Holder.
“These institutions should make judgments based on applicant’s creditworthiness, not the color of their skin. With today’s settlement, the federal government will ensure that the more than 200,000 African American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.”
The complaint also alleges that, as a result of Countrywide’s policies and practices, qualified Black and Latino borrowers were placed in subprime loans rather than prime loans even when similarly-qualified non-Hispanic White borrowers were placed in prime loans.
The racist placement of borrowers in subprime loans, also known as “steering” occurred because it was Countrywide’s business practice to allow mortgage brokers and employees to place a loan applicant in a subprime loan even when the applicant qualified for a prime loan.
In addition, Countrywide gave mortgage brokers discretion to request exceptions to the underwriting guidelines and Countrywide’s employees had discretion to grant these exceptions.
“Countrywide was the largest of the rogue mortgage lenders that caused the current crisis. Regulators’ lax lending rules and loose oversight allowed these bad practices to flourish,” observed the Center for Responsible Lending about the settlement. “The DOJ settlement deals exclusively with Countrywide lending prior to the time it was acquired by Bank of America. The acquisition has been good for borrowers and the country because it took a bad actor off the street.”
“Kickbacks for steering people into higher priced mortgages than they qualified for should never have been allowed. It hurt all families, especially in African American and Hispanic communities.”
A study released in November found there are still millions more devastating foreclosures ahead and the crisis may not even be half way over. Once again Blacks and Latinos are most likely to lose their homes.
About 2.7 million of the mortgages made at the height of the housing bubble have ended in foreclosure and at least another 3.6 million likely will fail in the next few years, the Center for Responsible Lending reported.
The report–Lost Ground, 2011–finds that while most people who have lost their homes have been White and in middle- or higher-income brackets, Blacks and Latino families have suffered a disproportionate share of losses.
The research also shows that differences in income and credit history don’t explain why communities of color have been harder hit–but predatory mortgages such as those done by Countrywide do.
There are also problems with how foreclosures are handled. Fourteen large mortgage servicers were required to correct deficiencies in servicing and foreclosure processes and to engage independent firms to conduct a wide review of foreclosure actions in 2009 and 2010.