In the largest residential fair-lending settlement in history, Bank of America Corp. has agreed to pay $335 million to settle allegations that its Countrywide Financial Corp. unit discriminated against minority homebuyers. The U.S. Department of Justice announced the decision last month. The agreement settles a civil complaint that the mortgage lender charged black and Hispanic borrowers higher fees and steered them into costlier mortgages than other buyers from 2004 to 2008, a period when the company originated millions of home loans. It also marks Charlotte, N.C.-based Bank of America’s latest step to move past the mortgage-related troubles that have been a big problem for the bank since it inquired Countrywide in 2008.

The Justice Department’s complaint said Countrywide – once one of the nation’s largest single-family mortgage lenders – discriminated against more than 200,000 minority borrowers, charging them higher fees and interest rates than white homebuyers because of their race or national origin, not their creditworthiness. Countrywide also steered minority buyers into subprime mortgages, which came with higher costs and unpredictable adjustable interest rates and left those borrowers with a higher risk of foreclosure, according to the Department.

The Justice Department alleged that black or Hispanic borrowers who obtained loans through mortgage brokers were more than twice as likely to be placed in a subprime loan as white borrowers with similar credit. The settlement, which must have court approval, provides $335 million in compensation to those borrowers. This is the latest in a series of fair-lending cases in recent months, most of them involving smaller mortgage companies. It’s one of Bank of America’s larger payouts related to the mortgage crisis. U.S. Attorney General Eric Holder said in a statement:

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. These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin.

The Justice Department began investigating Countrywide’s lending practices for potential patterns or practices of discrimination after referrals by federal regulators in 2007 and 2008. Hopefully, this practice will not be tolerated by any lending institution in the future. They should have learned a good lesson.

Source: Miami Herald