As of Wednesday morning, Bank of America has agreed to pay $335 million to settle a lawsuit over discriminatory lending practices. The lending practices, which were found to charge minority borrowers more, were used by Countrywide Financial before the troubled lender was purchased by Bank of America.
Discriminatory lending practices revealed
Federal investigators have documented the discriminatory lending practices found at Countrywide Financial. The investigation found that Countrywide charged higher fees and lending rates to minority borrowers. Minority borrowers with similar credit ratings to Caucasian borrowers were steered to more expensive sub-prime mortgages.
Partially because sub-prime mortgages were more expensive and more difficult to maintain, those minority groups have been disproportionately affected by the housing downturn and foreclosure. These practices were documented at the mortgage lender between 2004 and 2008.
Bank of America stops practices
In 2008, as Countrywide was falling into financial ruin, Bank of America took over the mortgage company for about $2.8 billion. When Bank of America took over Countrywide, it significantly altered the lending practices within Countrywide. Bank of America spokesman Dan Frahm stated:
“We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues.”
The practices, however, were found to have cost minority, especially Latino, borrowers millions of dollars in additional fines, fees and payments made.
Millions in settlements
A federal unit developed specifically to root out discriminatory lending has found and prosecuted several other cases outside Countrywide. More than $30 million in individual compensation has already been collected, so the total will reach $365 million with the Bank of America/Countrywide settlement.
Much of this money is going back to individual borrowers.If you believe that your mortgage or loan was issued in a discriminatory way, watch for contact information on the Justice Department website for the independent administrator.