Friday, December 30, 2011

Bank of America Settles Huge Fair-Lending Lawsuit For Discriminating Against Minority Borrowers

Illinois and federal officials recently announced that Bank of America must pay $335 million to settle allegations that its Countrywide Financial unit discriminated against minority borrowers during the housing boom.  According to the Chicago Tribune, Countrywide allegedly steered African-American and Hispanic borrowers into high-risk subprime loans and charged them higher interest rates and fees on mortgages.

This news comes as a sad but not unsurprising development.  Our Oak Park foreclosure defense attorneys know that many instances of mortgage fraud and abuse occurred before and after the housing bubble burst.  If you or someone you know is in danger of mortgage foreclosure, it may be worth examining your options and understanding the ways in which unscrupulous lenders have taken advantage of troubled homeowners in the past. 

Bank of America’s agreement is the largest residential fair-lending settlement in history, reports the New York Times.  However, a federal judge in California first must approve the settlement.  The now-defunct Countrywide was originally based in California before Bank of America purchased its assets.  The allegations stem from actions the company took between 2004 and 2008, before Bank of America bought it. 

Countrywide’s lending problems evolved out of a company policy granting loan officers and brokers the discretion to alter the terms for which a particular applicant qualified.  However, Countrywide failed to develop any system that ensured their loan officers were complying with fair-lending rules.  Federal civil rights laws prohibit lending practices that have a disparate impact on minority borrowers.  Here, Countrywide charged Hispanics and African-Americans more, on average, than white applicants with similar credit histories.

On the federal level, the Department of Justice increasingly has investigated instances of illegal lending practices due to the housing crisis and the revelation of suspected fraudulent or discriminatory behavior.  In 2010, the Department formed a unit focusing exclusively on banks and mortgage brokers suspected of discriminating against minority mortgage applicants. 

Closer to home Attorney General Lisa Madigan has also investigated fraudulent Illinois lending practices.  In June 2010, AG Madigan filed a lawsuit against Countrywide Financial Corp., Countrywide Home Loans Inc., and Full Spectrum Lending Inc., a branch of Countrywide that primarily sold subprime loans.  The suit alleged that Countrywide violated the Illinois Fairness in Lending Act and the Illinois Human Rights Act.  The Illinois Fairness in Lending Act states that no financial institution may “[d]eny or vary the terms of a loan on the basis of the borrower’s race . . . or national origin.”  815 ILCS 120/3.  By analyzing Countrywide’s lending data, AG Madigan was able to determine that minority borrowers paid more for mortgages than white borrowers.  They also were sold high-risk (i.e. subprime) loans even when they qualified for low-cost (i.e. prime) loans.

In today’s economy, the Oak Park mortgage foreclosure lawyers at the Emerson Firm know that people of all income levels may find themselves struggling.  We understand that clients appreciate lawyers who care about them, as well as about the outcome of their case.  If you believe you were a victim of lending discrimination, or if you have questions about whether defending your mortgage foreclosure or choosing bankruptcy is right for you and your family, please contact the Emerson Firm at 708-660-9190 or visit us online today.

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