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Bank of America to settle fair-lending case for $335 million

By Katherine Skiba, Chicago Tribune –


WASHINGTON — Illinois Attorney General Lisa Madigan and federal officials on Wednesday announced a $335 million national settlement with Bank of America Corp. stemming from former mortgage giant Countrywide allegedly steering minority borrowers into subprime loans and charging them higher interest rates and fees on mortgages.

Approximately 15,000 African-American and Latino mortgage-holders in Illinois who took out loans from 2004 to 2008 and were victims of discriminatory lending practices may be eligible for money from the settlement, according to Natalie Bauer, a Madigan spokeswoman.

Nationwide, about 200,000 mortgage holders were affected, Bauer said.

The assets of now-defunct Countrywide, which was based in Southern California, were purchased by Bank of America, based in Charlotte, N.C., Bauer said.

The settlement calls for an independent administrator to contact and distribute compensation payments to borrowers identified by the Justice Department as victims of Countrywide’s discrimination. Affected borrowers will be contacted by the administrator, a statement from Madigan said.

According to the statement, individuals who believe they were victims of Countrywide lending discrimination and have questions about the settlement should email

The settlement stems from Madigan’s lawsuit in June 2010 against Countrywide Financial Corp., Countrywide Home Loans Inc. and Full Spectrum Lending Inc., an arm of Countrywide that mostly sold subprime loans.

The suit alleged numerous violations of the Illinois Fairness in Lending Act and the Illinois Human Rights Act, and included data showing minority borrowers paid more for mortgages than white borrowers and were more often sold riskier home loans despite qualifying for prime, or low-cost, loans.

Madigan’s analysis of Countrywide loan data found that these disparities could not be explained by objective factors such as borrowers’ credit scores or their debt-to-income ratios, Bauer said.

Madigan’s suit and subsequent settlement follows years of investigation by her office into Countrywide’s lending policies and practices during the years leading up to the housing market’s collapse.

Madigan issued a fair lending subpoena to Countrywide in March 2008, after a study by the Chicago Reporter magazine of federally collected mortgage-lending data for the Chicago area found that, in 2006, Countrywide Financial Corporation sold higher-cost loans to 50.9 percent of its African-American borrowers and 33.8 percent of its Latino borrowers, while only 19.5 percent of the company’s white borrowers received high-cost loans.

U.S. Attorney General Eric Holder in making public the settlement, called it the Justice Department’s largest residential fair-lending settlement.

He said the settlement, which is subject to court approval, was filed in U.S. District Court for the Central District of California.

Dan Frahm, a Bank of America spokesman, said in a statement: “We reached this settlement to resolve issues about Countrywide’s alleged historic practices that occurred before Bank of America acquired the company. Bank of America’s practices are not at issue.

“We are committed to fair and equal treatment of all our customers, and will continue to focus on doing what’s right for our customers, clients and communities. We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues.”

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