Economic Justice? BofA to Pay $335 Million Settlement For Predatory Lending, Financial Abuse of Blacks and Latinos
According to a Department of Justice press release, the DOJ and Bank of America reached an unprecedented $335 million settlement over allegations that BofA's Countrywide Financial Corporation pushed blacks and Latinos into subprime mortgages, and violated fair lending practices by charging black and Latino borrowers higher fees and interest rates because of their skin color, not creditworthiness. The money will be used to compensate the victims of BofA's financial abuse. The settlement also requires Countrywide "to implement policies and practices to prevent discrimination if it returns to the lending business during the next four years."
“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We are using every tool in our law enforcement arsenal, including some that were dormant for years, to go after institutions of all sizes that discriminated against families solely because of their race or national origin.”
The DOJ says:
The settlement, which is subject to court approval, was filed today in the U.S. District Court for the Central District of California in conjunction with the department’s complaint which alleges that Countrywide discriminated by charging more than 200,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers in both its retail and wholesale lending. The complaint alleges that these borrowers were charged higher fees and interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk.
The United States also alleges that Countrywide discriminated by steering thousands of African-American and Hispanic borrowers into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. All the borrowers who were discriminated against were qualified for Countrywide mortgage loans according to Countrywide’s own underwriting criteria.
The settlement is historic. According to the DOJ, it is the largest residential fair lending settlement ever, and the first time the department dealt with a loan case of this nature:
This is the first time that the Justice Department has alleged and obtained relief for borrowers who were steered into loans based on race or national origin, a practice that systematically placed borrowers of color into subprime mortgage loan products while placing non-Hispanic white borrowers with similar creditworthiness in prime loans.
The settlement does not only address predatory practices used against people of color. It also seeks to remedy abusive treatment of married couples.
The settlement also addresses the claim that Countrywide violated the Equal Credit Opportunity Act by discriminating on the basis of marital status against non-applicant spouses of borrowers by encouraging them to sign away their home ownership rights . The law allows married individuals to apply for credit either in their own name or jointly with their spouse, even when the property is owned by both spouses. For applications made by married individuals applying solely in their own name between 2004 and 2008, Countrywide encouraged non-applicant spouses to sign quitclaim deeds or other documents transferring their legal rights and interests in jointly-held property to the borrowing spouse. Non-applicant spouses who execute a quitclaim deed risk substantial uncertainty and financial loss by losing all their rights and interests in the property securing the loan.
The Department of Justice's recognition that BofA engaged in predatory practices that robbed families and destroyed the economy is a victory for economic justice in the United States. As Occupy Wall Street grows and bankers' greed becomes more prominent in the national discourse, we can hope to see more of it in the future.
The DOJ said the settlement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), an effort to investigate and prosecute financial crimes.