Countrywide/BOA to Reimburse Minority Borrowers $335 Million

by devteam December 22nd, 2011 | Share

AssistantrnU.S. Attorney General Thomas E. Perez condemned the lending practices of thernformer Countrywide Financial Corporation while announcing a consent order providing for $335 million in relief for its victims and arnprocess to identify and compensate those individuals.    </p

Thernsettlement was filed by the U.S. Justice Department (DOJ) on Wednesday in thernCentral District court of California and is subject to court approval. The DOJrnsays it’s the largest settlement in history over residential fairrnlending practices and wasrnactually reached with Bank of America which purchased Countrywide in 2008.  Perez mentioned the Bank only in passing inrnhis remarks.   </p

The suit leading to the settlementrnalleged widespread abuses of minority borrowers and a consistent practice byrnCountrywide of targeting communities of color during the housing boom.  Perez said that a qualified African-Americanrnor Hispanic who went to the company for a loan likely paid more simply becausernof the color of his skin.  These minorityrnborrowers were also “far more likely to be steered into an expensive and riskyrnsubprime loan than a similarly-qualified white borrower.” </p

Perez said that the investigation wasrnone of the most extensive ones in the Department’s history, involving data onrnover 2.5 million loans and their borrowers’ creditworthiness.  The Federal Reserve and the Office of ThriftrnSupervision also played a role in the investigation. The complaint identifiedrnmore than 200,000 borrowers, two-thirds Latino and the remainderrnAfrican-American.  </p

The Assistant AG said that Countrywide “understoodrnmarketing and how to build trust.  ‘Se habla espanol,’ they said in Latino communities, andrntwo-thirds of our victims are Hispanic.   rnBut as our complaint outlines, they exploited that trust.  It was<bCountrywide’s business strategy, the complaint alleges, to target localrnAfrican-American and Hispanic markets in order to expand its lending andrnultimately gain market dominance in making residential loans in thoserncommunities. </p

“Butrnonce those borrowers walked in Countrywide’s door, they did not receive fairrnand equal terms, they received discriminatory terms.   And chances are the victims had no idea theyrnwere being victimized.    They werernthrilled to have gotten a loan and realized the American dream.   They had no idea that they could have, andrnshould have, gotten a better deal.  Thisrnis discrimination with a smile.”   </p

That Countrywide allowed itsrnmortgage brokers and employees to place a loan applicant in a subprime loanrneven when the applicant qualified for a prime loan goes to the heart of some ofrnthe most harmful practices during the subprime boom, Perez said.   “As a result of these policies andrnpractices, the odds of an African-American or Hispanic borrower receiving arnsubprime loan instead of a prime loan were more than twice as high as those forrnsimilarly-situated non-Hispanic White borrowers.   More than 10,000 Hispanic andrnAfrican-American borrowers were placed into subprime loans even thoughrnnon-Hispanic White borrowers who had similar credit qualifications were placedrninto prime loans.”    </p

The complaint specifically allegesrnthat, from 2004 to 2008 Countrywide engaged in a nationwide pattern or practicernof discrimination based on race or national origin.  DOJ alleges three different race or nationalrnorigin claims, as well as a fourth claim based on marital status discrimination.  The latter claim alleges that spouses whornwere not applicants on a loan were required to sign away rights to their homernbefore the spouse could obtain the loan.  rn</p

“Hispanic and African-Americanrnborrowers who were steered into subprime loans paid, on average, tens ofrnthousands of dollars more for their loans and were subject to possiblernprepayment penalties, increased risk of credit problems, default, andrnforeclosure, and the emotional distress that accompanies such economic stress.”</p

Angelo Mozilo, Countrywide’s founderrnand former CEO was fined $22.5 million by the Securities and ExchangernCommission last year and agreed to pay an additional $45 million inrndisgorgement of ill-gotten gains.  Thernamounts, said to be the largest penalty every paid by an executive of a publicrncompany, were for a claim of disclosure violation and insider trading. 

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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