Thomas E. Perez , DOJ: Bank of America to Pay $335M Discrimination Settlement Over Countrywide Loans

December 22, 2011

The U.S. Justice Department says Bank of America has agreed to pay $335 million to resolve allegations that its Countrywide Financial unit discriminated against qualified African-American and Hispanic borrowers on home loans.

Officials say Countrywide charged over 200,000 African-American and Hispanic borrowers higher fees and interest rates than white borrowers with a similar credit profile. The alleged discrimination occurred between 2004 and 2008, before the bank purchased Countrywide. A Bank of America spokesman says the bank does not practice lending based on race.

U.S. Attorney General Eric Holder Wednesday said the settlement makes clear that the Justice Department will not hesitate to aggressively hold lenders, including the nation's largest, accountable for discrimination and financial misconduct. He also said these institutions should make judgments based on applicants' creditworthiness, not on the color of their skin.

Bank of America has lost billions of dollars, in part because of problems associated with the 2008 takeover of Countrywide Financial. Countrywide held a large number of mortgages that borrowers were unable to repay, badly hurting the lender. Bank of America has faced lawsuits connected with the mortgage business.

Assistant Attorney General Thomas E. Perez commented: "At the core of the allegations in the complaint is a simple story: If you were African-American or Hispanic and you went to Countrywide for a loan, and you were qualified, you likely paid more simply because of the color of your skin. You likely paid more than a similarly-qualified white borrower if you were African-American or Hispanic and received your loan from a Countrywide loan officer, or from Countrywide’s mortgage brokers. And if you were African-American and Hispanic you were far more likely to be steered into an expensive and risky subprime loan than a similarly-qualified white borrower. More than 200,000 African-American and Hispanic victims are identified in the complaint, which alleges that they were charged higher prices or steered into more risky products because of the color of their skin rather than the content of their creditworthiness.

Countrywide built a business based, in large part, on the trust they earned from families as they guided families through the most important financial transaction of their lives. They 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 communities.

But 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.

This was one of the most extensive investigations in our history. We reviewed data on over 2.5 million loans, including data loan terms and information on each borrower’s creditworthiness."