By Peter Schroeder - 12/21/11 08:42 PM EST
The Justice Deparment has reached a $335 million settlement with Bank of America's Countrywide Financial unit, after it charged that the mortgage lender discriminated against hundreds of thousands of African-American and Hispanic borrowers.
The government claims that Countrywide, widely seen as a major culprit of the financial crisis, steered thousands of minority borrowers into subprime loans when white borrowers got prime ones, and charged them higher interest rates and fees because of their race. The discriminatory lending occurred from 2004 to 2008, as the subprime mortgage bubble that precipitated the financial crisis was building.
Countrywide was purchased by Bank of America in 2008.
In its complaint, the government said more than 200,000 minority borrowers received biased service from Countrywide, including roughly 10,000 that were steered into subprime loans when they qualified for safer prime mortgages. The misbehavior occurred because the mortgage lender allowed its employees to vary the terms of a home loan and failed to take steps to block discriminatory practices it knew was happening within the company.
The settlement is the largest ever reached by the government in a residential fair lending matter.
Holder said the government's investigation found evidence of discrimination in more than 180 markets nationwide in 41 states and the District of Columbia. As an example of the "alarming conduct" by Countrywide, he said that a qualified African-American borrower seeking $200,000 in 2007 ended up paying an average of $1,200 more in fees than a similar white borrower.
The settlement marks the second time in the last several days that Countrywide has come under government scrutiny. On Friday, House Oversight Committee Chairman Darrell Issa (R-Calif.) said four unnamed House lawmakers received VIP loans from Countrywide, and referred his findings to the House Ethics Committee.
In 2010, the lender's "Friends of Angelo" program was scrutinized by Congress after it was revealed lawmakers and other government officials were receiving special treatment.
"Angelo" is a reference to Angelo Mozilo, Countrywide's former CEO.
The Senate Ethics Committee examined and ultimately cleared retired Sen. Chris Dodd (D-Conn.) and Senate Budget Committee Chairman Kent Conrad (D-N.D.) for receiving loans through the program. Both lawmakers denied any wrongdoing and said they did not ask for preferential treatment.
In 2010, Mozilo paid a record $22.5 million penalty to settle charges with the Securities and Exchange Commission that he and other ex-Countrywide executives misled investors as the subprime mortgage crisis developed. He also is barred from ever again severing as an officer or director of a public company.