The Bank of America, just before Christmas, agreed to pay a $335 million settlement on behalf of its Countrywide financial unit for steering Black and Latino homeowners toward sub-prime loans.
Countrywide Financial Services was one of the main architects of the predatory lending that led to the financial crisis and the “Great Recession.” The Bank of America acquired Countrywide at the height of the banking meltdown.
The settlement, resulting from a suit against Bank of America by the Department of Justice, is the largest on record.
Commenting on the deal, which is subject to approval by a California federal judge, Attorney General Eric Holder said, “The department’s action against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for lending discrimination.”
Notwithstanding the importance of the settlement, to date, no banking official has faced criminal charges for the financial swindle.
Countrywide was accused of disproportionately giving sub-prime loans to minority borrowers as opposed to white borrowers with similar credit histories.
The New York Times writes that the Department of Justice “concluded that Countrywide loan officers and brokers charged higher fees and rates to more than 200,000 minority borrowers across the country than to white borrowers who posed the same credit risk.”
“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,” remarked Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.
Approximately two-thirds of those affected by Countrywide’s discriminatory practices were Latinos, the other third African American. Should the settlement be approved, reimbursements will range from several hundred to a few thousand dollars .
According to the New York Times, “The odds of a minority applicant being steered into such a loan were more than twice as high as those for a non-Hispanic white borrower with a similar credit rating.”
Countrywide’s once lucrative sub prime financial strategy quickly became standard policy in the banking and mortgage industry. Millions of homeowners were affected.
President George Bush’s administration, which trumpeted home ownership as a ticket to freedom, ignored early warnings of an emerging crisis.
Earlier, Citibank with its widely touted “Live Richly” marketing strategy encouraged homeowners to take out second mortgages on their homes. Former Treasury Secretary Robert Rubin was one of the main champions of these policies.
Countrywide had earnings of $674 billion between 2004 and 2007, the period in which the sub-prime loans were at their height, says the Grio.com.
Countrywide’s stock has lost two thirds of its value over the last two years, according to the New York Times.
Photo: Adam Pieniazek