The Justice Department announced a $335 million settlement with Bank of America Wednesday over discriminatory lending practice at Countrywide Financial.
Attorney General Eric Holder said a federal probe found discrimination against at least 200,000 qualified African American and Latino borrowers from 2004 to 2008, during the height of the housing market boom. He said that minority borrowers who qualified for prime loans were steered into higher-interest-rate subprime loans.
Thomas Perez, assistant attorney general for Justice’s civil rights division, said most of the victims of the discrimination were not aware that they were improperly steered to the riskier mortgages.
“They were thrilled to have gotten the loan and to have realized the American dream,” Perez said. “They had no idea they could have and should have gotten a better deal. This is discrimination with a smile.”
He said the discriminatory practices went to the heart of the problem with subprime mortgages and the financial market meltdown they helped set in motion. These borrowers paid on average tens of thousands of dollars more in interest and were subject to pre-payment penalties.
He said while the discriminatory loans happened across the country, about 30% of the victims were in California, where Countrywide was based. About two-thirds of the victims were Latino.
Bank of America shares close below $5
“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,” Perez said.
He said that money from the settlement will go to borrowers who were identified by the probe. Details about how they will be compensated are not yet available.
Shares of Bank of America (BAC, Fortune 500), which closed below $5 for the first time since 2009 on Monday, rose about 1% to $5.21 after Wednesday’s announcement.
Bank of America purchased leading mortgage lender Countrywide in 2008 for $4 billion, in a deal that made the bank the nation’s No. 1 home loan lender at the time. The deal closed in July ahead of the meltdown in financial markets that fall.
