Countrywide/BOA to Reimburse Minority Borrowers $335 Million


U.S. Attorney General Thomas E. Perez condemned the lending practices of the
former Countrywide Financial Corporation while announcing a consent order providing for $335 million in relief for its victims and a
process to identify and compensate those individuals.   

settlement was filed by the U.S. Justice Department (DOJ) on Wednesday in the
Central District court of California and is subject to court approval. The DOJ
says it’s the largest settlement in history over residential fair
lending practices and was
actually reached with Bank of America which purchased Countrywide in 2008.  Perez mentioned the Bank only in passing in
his remarks.   

The suit leading to the settlement
alleged widespread abuses of minority borrowers and a consistent practice by
Countrywide of targeting communities of color during the housing boom.  Perez said that a qualified African-American
or Hispanic who went to the company for a loan likely paid more simply because
of the color of his skin.  These minority
borrowers were also “far more likely to be steered into an expensive and risky
subprime loan than a similarly-qualified white borrower.”

Perez said that the investigation was
one of the most extensive ones in the Department’s history, involving data on
over 2.5 million loans and their borrowers’ creditworthiness.  The Federal Reserve and the Office of Thrift
Supervision also played a role in the investigation. The complaint identified
more than 200,000 borrowers, two-thirds Latino and the remainder

The Assistant AG said that Countrywide “understood
marketing and how to build trust.  ‘Se habla espanol,’ they said in Latino communities, and
two-thirds of our victims are Hispanic.   
But as our complaint outlines, they exploited that trust.  It was
Countrywide’s business strategy, the complaint alleges, to target local
African-American and Hispanic markets in order to expand its lending and
ultimately gain market dominance in making residential loans in those

once those borrowers walked in Countrywide’s door, they did not receive fair
and equal terms, they received discriminatory terms.   And chances are the victims had no idea they
were being victimized.    They were
thrilled to have gotten a loan and realized the American dream.   They had no idea that they could have, and
should have, gotten a better deal.  This
is discrimination with a smile.”  

That Countrywide allowed its
mortgage brokers and employees to place a loan applicant in a subprime loan
even when the applicant qualified for a prime loan goes to the heart of some of
the most harmful practices during the subprime boom, Perez said.   “As a result of these policies and
practices, the odds of an African-American or Hispanic borrower receiving a
subprime loan instead of a prime loan were more than twice as high as those for
similarly-situated non-Hispanic White borrowers.   More than 10,000 Hispanic and
African-American borrowers were placed into subprime loans even though
non-Hispanic White borrowers who had similar credit qualifications were placed
into prime loans.”   

The complaint specifically alleges
that, from 2004 to 2008 Countrywide engaged in a nationwide pattern or practice
of discrimination based on race or national origin
.  DOJ alleges three different race or national
origin claims, as well as a fourth claim based on marital status discrimination.  The latter claim alleges that spouses who
were not applicants on a loan were required to sign away rights to their home
before the spouse could obtain the loan.  

“Hispanic and African-American
borrowers who were steered into subprime loans paid, on average, tens of
thousands of dollars more for their loans and were subject to possible
prepayment penalties, increased risk of credit problems, default, and
foreclosure, and the emotional distress that accompanies such economic stress.”

Angelo Mozilo, Countrywide’s founder
and former CEO was fined $22.5 million by the Securities and Exchange
Commission last year and agreed to pay an additional $45 million in
disgorgement of ill-gotten gains.  The
amounts, said to be the largest penalty every paid by an executive of a public
company, were for a claim of disclosure violation and insider trading. 

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