Bank of America Corp. (BAC) 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.
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.
The penalty for Bank of America, the second-largest U.S. lender by deposits, dwarfs the $30 million total for all previous fair-lending settlements extracted by the agency, including $6.1 million paid last year by American International Group Inc. The Obama administration has boosted scrutiny of banks to discourage loan discrimination after the housing bust led to record defaults.
The review covered 2.5 million loans, including data on terms and creditworthiness of borrowers, according to the Justice Department. The agency said Calabasas, California-based Countrywide allowed loan officers and brokers to vary interest rates and fees, and knew it was discriminating against minorities. Whites with similar credit profiles received prime loans, according to the statement.
Bank of America Chief Executive Officer Brian T. Moynihan, 52, is cleaning up liabilities inherited with the takeover of Countrywide that was engineered by his predecessor, Kenneth D. Lewis. The Charlotte, North Carolina-based bank has committed about $40 billion for mortgage refunds, lawsuits and foreclosures since 2007.
Bank of America is still in negotiations, along with four other mortgage servicers, to settle unrelated probes from U.S. regulators and dozens of attorneys general that the firms used so-called robo-signers to improperly submit foreclosure documents without verifying them.
Before being acquired, Countrywide was the biggest U.S. provider of subprime mortgages, loans that regulators have said were offered disproportionately to minorities and more prone to end in default. Bank of America saved the lender from possible bankruptcy in July 2008 when it bought the Calabasas, California-based company for $2.5 billion, almost a year after investing $2 billion in preferred shares.
