Bank of America agreed to pay $335 million to resolve allegations that its Countrywide unit engaged in a widespread pattern of discrimination against qualified African-American and Hispanic borrowers on home loans.
The settlement with the U.S. Justice Department was filed Wednesday with the Central District federal court of California and is subject to court approval. The DOJ says it's the largest settlement in history over residential fair lending practices.
According to the DOJ's complaint, Countrywide charged more than 200,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers with similar credit profiles. The complaint says these borrowers were charged higher fees and rates because of their race or national origin rather than any objective criteria.
"These institutions should make judgments based on applicants' creditworthiness, not on the color of their skin," said Attorney General Eric Holder. "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."
Bank of America bought the nation's largest subprime lender, Countrywide Financial, in 2008.
Dan Frahm, a Bank of America spokesman, said in a statement that the bank does not practice lending based on race. It will continue to resolve remaining Countrywide issues, he said.
The United States' complaint says that Countrywide was aware that the fees and interest rates that its loan officers were charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it.
By steering borrowers into subprime loans from 2004 to 2007, the complaint alleges, Countrywide harmed those qualified African-American and Hispanic borrowers. Subprime loans generally carried costlier terms, such as prepayment penalties and significantly higher adjustable interest rates.
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