The Department of Justice filed its largest ever residential fair lending settlement Wednesday to resolve a discrimination lawsuit against Countrywide Financial Corporation, according to a news release.
The $335 million settlement will compensate more than 200,000 African American and Hispanic borrowers who were allegedly charged higher fees and interest rates in mortgage lending than white borrowers from 2004 to 2008, the department said. The settlement is still subject to court approval, but it was filed today in the U.S. District Court for the Central District of California.
The department says Countrywide pushed thousands of qualified African American and Hispanic borrowers into subprime mortgages while white borrowers with similar credit were given prime loans. Countrywide now operates as a subsidiary of Bank of America, which bought the now-defunct company in 2008.
“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,” Attorney General Eric Holder said in the news release. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin. With today’s settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.”
The department alleges the company allowed its loan officers to vary an interest rate from the set price based on the borrower’s objective credit-related factors, the news release said. The complaint also alleges that the company was aware of the discriminatory pricing but it did not take any steps to stop the practice.
According to a New York Times report, a Bank of America spokesman said it’s important to note that these allegations are based on conduct before the company took Countrywide over.
“We are committed to fair and equal treatment of all our customers, and will continue to focus on doing what’s right for our customers, clients and communities,” Dan Frahm, a Bank of America spokesman, told the Times. “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.”
“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,” Thomas E. Perez, Assistant Attorney General for the Civil Rights Division, said in the news release. “We are using every tool in our law enforcement arsenal, including some that were dormant for years, to go after institutions of all sizes that discriminated against families solely because of their race or national origin.”