Countrywide Financial’s $335 million racial discrimination settlement

December 22, 2011

Countrywide Financial agreed to pay a $335 million settlement for allegedly engaging in a widespread practice of discrimination against qualified Hispanic and African-American  borrowers from 2004 through 2008.

The Department of Justice Wednesday filed its largest residential fair lending settlement in history to resolve allegations that Countrywide Financial Corporation and its subsidiaries discriminated by charging more than 200,000 Hispanic and African-American 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.

Countrywide 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 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,” said Attorney General Eric Holder. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin. With today’s settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.”

The complaint alleges that African-American and Hispanic borrowers paid more than non-Hispanic white borrowers, not based on borrower risk, but because of their race or national origin. As a result of Countrywide’s policies and practices, qualified African-American and Hispanic borrowers were placed in subprime loans rather than prime loans even when similarly-qualified non-Hispanic white borrowers were placed in prime loans.

“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.”

Countrywide currently operates as a subsidiary of Bank of America but does not originate new loans.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.

The proposed settlement provides for an independent administrator to contact and distribute payments of compensation at no cost to borrowers whom the Justice Department identifies as victims of Countrywide’s discrimination. Individuals who believe that they may have been victims of lending discrimination by Countrywide and have questions about the settlement may email the department at countrywide.settlement@usdoj.gov.