A brother can’t catch a break, not even when he reaches the American dream and buys his first home. If that brother was in Los Angeles borrowing $200,000 and using Countrywide mortgage, he would have been hit with $1200 more in fees than a qualified White borrower with the same credit history and down payment. That’s the example the government gave about an unprecedented $335 million settlement announced yesterday with the beleaguered mortgage company.
“In today’s settlement with Countrywide Financial Corporation, we resolved the government’s allegations that Countrywide and its subsidiaries – which are now owned by Bank of America – engaged in discriminatory mortgage lending practices against more than 200,000 qualified African-American and Hispanic borrowers from 2004 through 2008,” Attorney General Eric Holder announced.
The settlement provides $335 million in compensation to victims of Countrywide’s discrimination during a period when it served as one of the nation’s largest single-family mortgage lenders and originated more than 4 million residential mortgage loans.
Subprime borrowers are often subjected to penalties and higher interest rates, and have a greater likelihood of default and foreclosure than those who have prime loans. Often, the impact of discriminatory lending practices can reach even farther – potentially harming borrowers’ credit; inhibiting their ability to find quality housing, employment, or access to higher education; and depriving entire communities of economic opportunities.
In 2008, Charlotte, N.C.-based Bank of America Corp. purchased Countrywide, which was then the country’s largest subprime lender.
“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,” Assistant Attorney General Thomas Perez remarked, adding:
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.
The Central District court of California has to approve the settlement – the largest in history to address residential fair lending practices. The 200,000 victims will be compensated with the $335 million settlement once the court approves the consent decree. Is that enough, though?
“These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin,” said Holder. “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.”