Bank of America Corp. will pay a record $335 million to compensate Countrywide Financial Corp. borrowers who were charged more for home loans based on race and national origin. Occupy Wall Street protesters say that much more needs to be done.
Countrywide, acquired by Bank of America in 2008, assessed higher fees and interest rates to more than 200,000 black and Hispanic borrowers, the U.S. Department of Justice said yesterday in a statement. The lender also steered minorities into higher-cost subprime mortgages from 2004 to 2007, even when they qualified for prime loans, the agency said.
Occupy Wall Street protesters aren't too impressed by the settlement, but in an interview with CNN news, some acknowledge that it's a step in the right direction; a beginning with much more that needs to be done.
Thomas Perez, Asst. Attorney General for the DOJ's civil rights division, said most victims of the loan discrimination were unaware that they were improperly steered to the riskier mortgages.
"They were thrilled to have gotten the loan and to have realized the American dream," Perez said. "They had no idea they could have and should have gotten a better deal. This is discrimination with a smile."
MSNBC reports that there are two groups of consumers who may receive payments from the settlement:
Affected consumers include two different groups of victims who will be eleligible for two different types of damages, said Ira Rheingold, executive director of the National Association of Consumer Advocates, who spoke with Justice Department officials abou the settlement.
The first group involves Latinos and African Americans who had quality, prime loans with Countrywide but were charged more money, mostly in fees, for their mortgages than other consumers, Rheingold said. This group, which includes about 200,000 individuals can expect to get anywhere from $500 to $1,500.
The second set of victims, including about 10,000 Latino and African American borrowers, were steered into subprime loans even though they qualified for prime loans that carried a lower interest rate.
“Their damages may be more extensive,” Rheingold said, because in addition to being charged a higher rate many of these consumers ended up with greater financial problems as a result, including bad credit and possibly the loss of their homes. Such damages could total thousands of dollars per victim.
Kathleen Day, a spokeswoman for the Center for Responsible Lending, said that the settlements is a "good thing for the nation and for consumers,” and that it also “establishes what should a have been a line in the sand more than a decade ago. This never should have been allowed to happen.”
We can only hope that the settlement will cover at least the financial expenses incurred by the victims of these discriminatory lending practices. We've all seen the news reports of homeowners needing hospital admissions for heart attacks or other stress-induced medical conditions on foreclosure day, and the desperate measures some have been driven to when it became clear that they had only days left before they were tossed out on the street with their families.
No, this never should have been allowed to happen, but without criminal charges and someone doing prison time, there's no reason it won't happen again. Cheating people out of their money has become too acceptable on Wall Street.
The Justice Department has identified the victims and will be contacting consumers directly about the settlement, but if you believe you were a victim or have questions about the case you can email the agency at: email@example.com.