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Bank Of America Agrees to Pay $335 Million To Settle Discriminatory Lending Lawsuit

Bank of America Corporation has agreed to pay $335 million to settle a government lawsuit that its Countrywide Financial unit discriminated against minority home buyers. The settlement, filed yesterday in the U.S. District Court for the Central District of California by the U.S. Justice Department, must be approved by a federal court.

The government alleged that Countrywide and its subsidiaries charged more than 200,000 African-American and Hispanic home loan borrowers higher interest rates and fees than non-Hispanic white borrowers with similar incomes and credit scores. The lawsuit also claimed that:

"... Countrywide discriminated by steering thousands of African-American and Hispanic borrowers into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. All the borrowers who were discriminated against were qualified for Countrywide mortgage loans according to Countrywide’s own underwriting criteria."

Subprime loans are generally more expensive, with prepayment penalties and adjustable interest rates with sudden and huge increases after two or three years. Thomas E. Perez, Assistant Attorney General for the Civil Rights Division, said:

“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream... We are using every tool in our law enforcement arsenal, including some that were dormant for years, to go after institutions of all sizes that discriminated against families solely because of their race or national origin.”

The department’s investigation into Countrywide’s lending practices began in 2007 after referrals by the Board of Governors of the Federal Reserve and the Office of Thrift Supervision to the Justice Department’s Civil Rights Division. Bank of America purchased Countrywide in 2008 for about $4 billion. The settlement amount is the largest of its type filed by the U.S. Justice Department.

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