Today, Bank of America settled discriminatory lending claims brought against it (and Countrywide Financial) by the Justice Department for steering qualified minority borrowers into subprime loans during the run-up to the mortgage crisis in 2008. Bank of America agreed to pay $335 million dollars for Countrywide's role in discriminating against minority borrowers between 2004 and 2008. According to CNN: "Attorney General Eric Holder said a federal probe found discrimination against at least 200,000 qualified African American and Latino borrowers from 2004 to 2008, during the height of the housing market boom. He said that minority borrowers who qualified for prime loans were steered into higher-interest-rate subprime loans."
The role that predatory lending and discriminatory bank practices played in the financial market crisis has been detailed many times on this blog previously. In the reckless lending period that precipitated the mortgage meltdown, minority borrowers were often targeted for subprime loans and in many instances, while qualified to receive prime loans were instead steered into more lucrative subprime loans by lending officers.
"Thomas Perez, assistant attorney general for Justice's civil rights division, said most of the victims of the discrimination were not aware that they were improperly steered to the riskier mortgages. . . . He said the discriminatory practices went to the heart of the problem with subprime mortgages and the financial market meltdown they helped set in motion. These borrowers paid on average tens of thousands of dollars more in interest and were subject to pre-payment penalties. [Perez] said while the discriminatory loans happened across the country, about 30% of the victims were in California, where Countrywide was based. About two-thirds of the victims were Latino. . . . He said that money from the settlement will go to borrowers who were identified by the probe. Details about how they will be compensated are not yet available."
According to the Wall Street Journal, Bank of America responded: "Bank of America neither admitted nor denied the allegations in the settlement. The bank said it settled to resolve issues tied to Countrywide's practices before Bank of America's July 2008 purchase of the lender. The bank said it is 'committed to fair and equal treatment of all our customers.'"