Bank of America Settles Over Countrywide Loans

As the year comes to a close, the problems are getting worse for Bank of America, Countrywide Financial and its subsidiaries. On December 21, 2011, federal officials announced a $335 million national settlement, stemming from discriminatory lending practices uncovered in more than 180 geographic markets across 41 states and the District of Columbia.

Back in July of 2011, Countrywide Financial – which has been owned by Bank of America since 2008 – settled with the Federal Trade Commission (FTC) over allegations Countrywide had overcharged borrowers for loan servicing fees. In the settlement, the FTC pledged to return $108 million to the more than 450,000 customers who were overcharged. This latest $335 million settlement only compounds the problems Bank of America has had since acquiring Countrywide.

According to an announcement by U.S. Attorney General Eric Holder on the December settlement with Countrywide, the lawsuit alleges widespread violations of the Fair Housing and Equal Opportunity Acts. According to the Department of Justice’s investigation, African-American and Hispanic borrowers were charged higher rates for mortgage loans based on their race or national origin.

The investigation found the discrimination occurred from 2004 to 2008, during the height of the housing market boom. During this period, Countrywide served as one of the nation’s largest single-family mortgage lenders and, according to Holder, originated more than 4 million mortgage loans.

The announcement details the extent of the discrimination. “For example,” Holder explains, “in 2007, a qualified African-American customer in Los Angeles borrowing $200,000 paid an average of roughly $1200 more in fees that a similarly qualified white buyer.” The settlement will compensate more than 200,000 African-American and Hispanic borrowers who were victims of this discrimination. This includes more than 10,000 African-American and Hispanic borrowers who were steered into subprime loans, despite the fact they qualified for prime loans.

“We reached this settlement to resolve issues about Countrywide’s alleged historic practices that occurred before Bank of America bought the company,” says Dan Frahm, a Bank of America spokesman. “Bank of America’s practices are not at issue.

“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. 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.”

Individuals who believe they are victims of Countrywide lending discrimination and have questions about the Bank of America settlement should email countrywide.settlement@usdoj.gov.