Bank of America Corporation has agreed to pay a record $335 million to compensate Countrywide Financial Corporation borrowers who were charged more for home loans based on their race and national origin. According to the United States Department of Justice, Countrywide, which was acquired by Bank of America in 2008, assessed higher fees and higher interest rates to more than 200,000 black and Hispanic borrowers. The DOJ also stated that Countrywide had steered minorities into higher-cost subprime mortgages from 2004 to 2007, even when they would qualify for prime loans. The penalty being paid by Bank of America, whose lender status is the second-largest in the U.S. by deposits, far exceeds the $30 million total for all previous fair-lending settlements reached by the Justice Department, which includes the $6.1 million paid last year by American International Group, Inc.
The review that was conducted covered 2.5 million loans, which included data on terms and creditworthiness of borrowers. According to the Justice Department, Countrywide allowed its loan officers and brokers to vary interest rates and fees and it was aware that it was discriminating against minorities, while whites with similar credit profiles received prime loans. Bank of America has been cleaning up the liabilities it inherited with the takeover of Countrywide for several years now as the North Carolina-based bank has committed around $40 billion for mortgage refunds, lawsuits and foreclosures since 2007.
This settlement resolves a lawsuit brought by Illinois Attorney General Lisa Madigan who also alleged discriminatory lending practices by Countrywide. According to Attorney General Madigan, the settlement provides for an independent administrator to distribute payments to borrowers identified by the Justice Department. Compensation to borrowers could reach more than $1,000 per loan, and the exact size will depend on who originated the loan and whether the borrower was steered into a subprime product. The settlement checks should start going out to qualified borrowers in about 24 months.
Bank of America is still in negotiations, along with four other mortgage servicers, to settle unrelated probes from U.S. regulators and several state Attorneys General involving the use of so-called robo-signers by the companies to improperly submit foreclosure documents without first properly verifying them. Before its acquisition, Countrywide was the biggest provider of subprime mortgages in the U.S. Regulators have said these loans were offered disproportionately to minorities and were more likely to end in default. Countrywide was also one of the worst when it comes to how it treated folks. Bank of America saved Countrywide from possible bankruptcy in July 2008 when it purchased the company for $2.5 billion. It had to know, or at least be highly suspicious of how truly bad Countrywide was at the time and ran the risk of massive litigation.
Borrowers with questions about the settlement referred to above can send an e-mail to firstname.lastname@example.org and request information. But, if you have any questions about predatory lending, or mortgage servicing fraud generally, contact Bill Robertson, a lawyer in our firm’s Consumer Fraud Section at 800-898-2034 or by email at Bill.Robertson@beasleyallen.com. Bill is currently handling cases against Countrywide, Bank of America and several other companies involving predatory lending practices. He is also handling cases involving mortgage servicing fraud against several companies.
Source: Bloomberg News
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