Bank of America agrees to pay $335M over discriminatory lending at Countrywide
To end a federal discriminatory lending lawsuit, Bank of America will pay the largest fine ever assessed in that sort of case, in connection with discriminatory lending practices by the Countrywide company it bought.
Countrywide, one of the mortgage lenders that is synonymous with the mortgage meltdown, owes $335 million in fines for discriminatory lending practices.
The fine will be paid by Bank of America, which purchased Countrywide after the lender collapsed in the crisis. Countrywide brokers are accused of steering blacks and Latinos into more costly home loans than white borrowers with the same financial profile. An estimated 200,000 people were affected.
The U.S. Justice Department described it as one of the worst cases of discriminatory lending in U.S. history.
Louise Story, Wall Street and finance reporter for The New York Times, said this is the first regulatory action stemming from the mortgage crisis that protects regular people. Previous actions had focused on fraud toward investors, primarily.
"This is about what the mortgage brokers on the ground told to the customers and whether they treated them fairly," Story said. "What the DOJ says here is that for Blacks and Latinos, they were two times more likely to be given higher rate loan than what they qualified for."
Accordingly, Blacks and Latinos had mortgages that were far more likely to get people in trouble and lead to default when the mortgage crisis hit, Story said.
The DOJ said that Countrywide had no system for making sure the Truth in Lending rules were followed, which provided an incentive to offer higher rate loans.
"They got bigger fees themselves for doing that," Story said.
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