Over 200,000 minority home buyers will receive part of a $335 million settlement reached between Bank of America and the Justice Department. The BofA minority settlement stems from charges that its Countywide Financial unit discriminated against African American and Hispanic home buyers between 2004 and 2007.
BofA acquired Countrywide in 2008, inheriting the company's legal liabilities. Amongst them were accusations that loan officers pushed minorities into more expensive mortgages and charged them higher interest rates and fees.
This is the largest residential discrimination settlement in U.S. history, reports MSNBC. The Justice Department reviewed 2.5 million loans in more than 180 geographical markets.
They found a pattern of discrimination based on race and national origin. White applicants with similar credit were given significantly better loans, explains Bloomberg. When Bank of America acquired Countrywide, the rampant discrimination stopped.
The BofA minority settlement is premised on the Fair Housing Act. In addition to prohibiting discrimination in housing sales and rentals, the Act prohibits discrimination in mortgage lending.
Home lenders may not discriminate on the basis of race, color, national origin, religion, sex, familial status or disability. Some states have added sexual orientation and gender identity to this list.
This means that persons with the same creditworthiness must be offered the same or similar loan products. Individuals cannot be charged more or denied prime loans because of the color of their skin.
Despite the prohibition, minority home buyers still face discrimination. They are less likely to obtain financing and more likely to receive less favorable terms, according to a study by the Department of Housing and Urban Development.
This is why the BofA minority settlement is so important. It lets lending institutions know that regulators are watching.
- BofA settles loans-bias case: $335M (Miami Herald)
- Mortgages and Your Rights to Fair Lending (FindLaw)
- Cities Sue Wells Fargo for Discrimination in Lending (FindLaw's Law & Daily Life)