BofA’s Countrywide to pay $335 mln over bias case

WASHINGTON, (Reuters) – Bank of America Corp’s   Countrywide Financial unit agreed on Wednesday to pay a  record $335 million to settle civil charges that it  discriminated against minority homebuyers, an historic  settlement for the Obama administration in the wake of the  subprime mortgage morass.

As the financial and housing crisis deepened in 2008, Bank  of America bought Countrywide, which specialized in so-called  subprime mortgages, focusing on loans to those with lower credit  ratings and charging them higher interest rates and payments  that suddenly increased after two or three years.

The settlement covers conduct between 2004 and 2008, before  the acquisition by Bank of America, and involved a range of  alleged wrongdoing, including charging African-Americans and  Hispanics higher interest rates and fees than non-minorities.

Minorities also were steered to more expensive subprime  loans even though they were qualified for traditional mortgage  rates. Justice Department officials said it was the largest  residential discrimination settlement in U.S. history.

“The victims had no idea they were being victimized. They  were thrilled to have gotten a loan and realize the American  dream,” Thomas Perez, head of the Justice Department’s civil  rights division, told reporters. “This is discrimination with a  smile.”

The civil settlement comes as the Obama administration has  faced criticism for the lack of criminal prosecutions related to  the conduct of financial institutions during the U.S. housing  crisis.

Federal prosecutors dropped a probe of former Countrywide  Chief Executive Officer Angelo Mozilo after determining his  actions in the mortgage debacle did not amount to criminal  wrongdoing.

The proposed settlement was filed in a federal court in  California where a judge must approve it.

SWIPE AT BUSH
ADMINISTRATION

Perez said that Countrywide’s actions contributed to the  housing crisis and that the Justice Department was again using  tools in its “law enforcement arsenal including some that were  dormant for years,” an apparent swipe at the previous  Bush administration.

More than 200,000 African-American and Hispanic borrowers in  41 states and the District of Columbia were affected by  Countrywide’s conduct, of which 30 percent were in California, a  state particularly hard-hit by the mortgage meltdown, the  Justice Department said.

They will receive compensation from the money paid by the  Bank of America unit, and those steered into subprime mortgages  will receive a greater share because they suffered more, Justice  Department officials said. However, there was no relief in the  settlement for the higher interest rates they pay.

Government investigators reviewed some 2.5 million loans in  their probe and found that African Americans and Hispanics were  more than three times as likely to receive high-cost subprime  loans than non-minorities.

Before imploding and being bought by Bank of America,  Countrywide had net earnings of about $6.7 billion between 2004  and 2007, according to the Justice Department.

Countrywide no longer originates new loans.

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