Updated 5:11 p.m.
Bank of America Corp. will spend $335 million to resolve the largest-ever fair lending suit over allegations that Countrywide Financial systematically discriminated against qualified black and Hispanic borrowers, the Justice Department said today.
Attorney General Eric Holder Jr., announcing the settlement this afternoon at a press conference, said in a statement that the Justice Department “will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for lending discrimination.”
Bank of America, which bought Countrywide in 2008, agreed to resolve the claims, filed in U.S. District Court for the Central District of California. The deal requires court approval.
The allegations are rooted in Countrywide’s lending practices between 2004 and 2008, the height of the housing bubble. DOJ said 200,000 victims are in 41 states and in the District of Columbia. Thirty percent of the victims are in California, where Countrywide was based.
The complaint (PDF) said Countrywide charged African American and Hispanic borrowers higher fees and interest rates than other borrowers in retail and wholesale lending. The higher fees, according to DOJ, were charged based on race or national origin and not the borrower’s credit worthiness.
DOJ also said Countrywide steered 10,000 homeowners into risky subprime loans despite their qualification for prime loans.
“These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin,” Holder said. “With today’s settlement, the federal government will ensure that the more than 200,000 African Americans and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.”
K&L Gates partner Melanie Brody, who represented Countrywide in the negotiations, declined to comment.
Dan Frahm, a Bank of America spokesman, said in a statement that Countrywide's practices occurred before Bank of America purchased the company.
"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," Frahm said. "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.”
The settlement’s consent decree sets forth a process to identify and compensate victims, Assistant Attorney General Thomas Perez of the Civil Rights Division said today.
Perez said the settlement was more than about money for individual victims, who stand to receive anywhere from several hundred dollars to several thousand.
Countrywide, Perez said, exploited the trust the company built in communities around the country. “They understood marketing. They understood how to build trust,” he said.
Borrowers, he said, had no idea Countrywide was ripping them off. First-time homeowners, he said, were delighted to receive a loan. “This is discrimination with a smile,” Perez told reporters this afternoon.
The case stemmed from work in the Justice Department’s fair lending unit, a component of the Civil Rights Division. Lawyers in the unit have filed or resolved ten fair lending matters since the group’s inception last February. Seven suits and ten investigations are pending, Holder said.