Countrywide Sued For Discriminating Against Black And Latino Mortgage Buyers

The Illinois AG filed a lawsuit this week against Countrywide, alleging that the now imploded mortgage lender steered blacks and Latinos into riskier subprime loans more often than whites, even when they qualified for safer mortgages.

In addition, the suit accuses Countrywide of charging minorities higher fees than whites. If they lose, Bank of America, which bought Countrywide, would be fined $25,000 for each violation.

“These charges relate to Countrywide practices well before Bank of America acquired the company. We are disappointed with the attorney general’s decision to pursue litigation,” said Bank of America in a statement. “We have fully cooperated with their investigation and have pointed out significant flaws in the methodology which we believe has been used as the basis for these claims.”

According to the complaint, the discrimination was the result of in a failure of policy. (Emphasis ours.)

These policies allowed Countrywide’s employees and mortgage brokers wide discretion in choosing the type of mortgage products offered to borrowers and manipulating the information for loan applications entered into Countrywide’s automated underwriting system. As a result of these discretionary policies, Countrywide‘s employees and mortgage brokers could steer borrowers into sub-prime mortgages even if borrowers could have been qualified for prime mortgages.

These policies also gave Countrywide’s employees and mortgage brokers wide-ranging discretion to increase or decrease the pricing on mortgage products they sold.

This discretion allowed Countrywide‘s employees and mortgage brokers to charge minority borrowers higher rates of interest than similarly-situated white borrowers.

Further, Countrywide’s compensation structure incentivized its employees and brokers to steer prime-eligible borrowers into sub prime loans and to sell loans at as high an interest rate as possible.

Illinois homeowners who believe they may be victims of Countrywide’s discriminatory lending practices should contact the Attorney General’s office via a special e-mail address at CountrywideDiscrimination@atg.state.il.us or by calling the Attorney General’s Homeowners Helpline at 1-866-544-7151.

MADIGAN SUES COUNTRYWIDE FOR DISCRIMINATION AGAINST AFRICAN AMERICAN AND LATINO BORROWERS [Illinois Attorney General]

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  1. areaman says:

    This sounds like the Wells Fargo “mud colored people” treatment.

  2. pop top says:

    Something I’ve been hearing since the whole mortgage crises started was that “subprime” loans were purposefully terrible loans for non-Whites, hence the name.

    • bhr says:

      Subprime loans where loans with higher rates for people who didnt qualify for “prime” rate mortgages. Usually these were people without enough credit, too small of a down payment or sub 680 credit scores.

      • hansolo247 says:

        Or too ignorant to know any better. It is very easy to fool stupid people…and very profitable.

        Many who qualified for Prime loans were steered to subprime because the broker’s take on the deal was much, much higher. Of course, the subprime loans start at lower rates than prime in general, and for those with the combination of greed and ignorance, it is an easy sell.

  3. SkokieGuy says:

    I would guess that compensation structures that reward employees for placing borrowers into loans with as high as possible interest rates applies to any company offering loans. Other mortgage companies, car dealerships, etc. The higher the spread, the more profit. Unless there’s regulation, every company will try to make the most profit possible.

    It saddens me that state AGs seem to be more aggressive about protecting consumer’s rights than the Feds.

    • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

      The idea is that it all comes out in the wash. A higher percentage of sub-prime would default compared to prime, and the higher costs ideally should just cover the spread.

      That said, race being a factor in creditworthiness is bullshit any way it’s sliced.

  4. kosmo @ The Soap Boxers says:

    “These policies also gave Countrywide’s employees and mortgage brokers wide-ranging desecration”

    Freudian slip, Illinois AG?

  5. Big Ant says:

    “Countrywide’s compensation structure incentivized its employees and brokers to steer prime-eligible borrowers into sub prime loans and to sell loans at as high an interest rate as possible”

    A bank wanted its employees to try to make them the most money with the highest interest rate, shocking ….

    • ARP says:

      Then why only do it for minorities?

      • crashfrog says:

        Not to defend the behavior, which is abhorrent, but the reason you only do it to minorities is because they’re the ones you can get away with doing it to. Likely they didn’t grow up with home ownership, like most whites do. Likely few of their friends have mortgages to compare to, like whites usually can do. Hell, maybe they’re just expecting loan officers to be racists, which does frequently seem to be the case, and they figure that’s the best rate they’re gonna be able to get just because of the color of their skin.

        • frank64 says:

          I think what happened is the sub-primes tried to screw everybody, but a higher percentage of whites shopped around more. These skummy banks didn’t care who they got their money from.

          This probably wasn’t racist, just that the same techniques happened to catch a bigger percentage of minorities. Now comes the catch 22, just like not having quotas, but then using numbers to prove discrimination.

          • Powerlurker says:

            In many cases it was minority loan officers that were screwing over the customers. A lot of black and Latino consumers like to try to keep their business “in the community” and these banks and their employees took advantage of that by giving them worse loans and convincing them that they were doing them a favor.

      • Big Ant says:

        I’m just saying that the last line in the quote was unnecessary. In fact it basically discounts everything else by saying it was common practice to do this to anyone, and the fact that it hits minorities more is that they didn’t look around or were not smart enough to not take the offered rate.

    • mythago says:

      Yeah, screw that whole honestly and fiduciary duty stuff. Our future United States of Galt will have no place for such parasitic notions.

      • grapedog says:

        I’m not sure I understand the Galt comment on there. It seems rather out of place all things considered.

  6. seishino says:

    Wait, so they incentivized giving home loans at as high an interest rate as possible, and as bad for the borrower as possible?

    This is why you need to go to multiple lenders before making a decision.

  7. DanRydell says:

    If they were preying on a specific group of people, it would be non-savvy, less educated buyers. They would have no motivation to sell more subprime loans just to minorities.

    It’s also possible that given multiple options, black and latino buyers chose the option that was worse long-term (but better short-term).

    I’ll reserve judgment until I see something that looks like evidence.

  8. bhr says:

    steer borrowers into sub-prime mortgages even if borrowers could have been qualified for prime mortgages.

    These policies also gave Countrywide’s employees and mortgage brokers wide-ranging desecration to increase or decrease the pricing on mortgage products they sold.

    Um… Thats how all mortgage companies and brokers work. Along with most high end sales of products and services. Prices are negotiable, and educated customers shop around for the best rate/terms. I see nothing wrong with that.

    THAT SAID, if they can prove that certain demos where consistently charged a higher rate, and can prove it was done intentionally then nail them to the wall.

    The problem, and I have been saying this for years, is that minority buyers tended to be far less educated about the process to know that they could do better. In many cases minority buyers where the first generation in their family to be home owners, and didnt benefit from generational experience.

  9. TuxthePenguin says:

    I really would like to see a good examination of the data.

    I wonder how many people were steered into sub-prime loans in each demographic and how many of them rejected the mortgage terms. IE, how many whites were offered subprime mortgages and rejected them compared to minorities? Could the issue be that both groups were offered at similiar rates, but it became a self-selection issue? IE, going on what others said – maybe the minorities just assumed that was the best they would get for whatever reason?

    • frank64 says:

      Very likely, but will that truth matter? The highly charged issue of race trumps reality in many instances.

      • PunditGuy says:

        Your “very likely” and “reality” are nothing but conjecture. The AG statement says that minority customers were “steered” into subprime loans more often than whites, which has nothing to do with whether white people rejected their loans or not.

    • veg-o-matic says:

      And what if it’s not about the minority borrowers being ignorant, but rather that other lenders also use the same kinds of practices?

      Racism like this is systemic, so you can find it everywhere.

  10. divedeep says:

    If Countrywide’s employees had such “wide discretion,” why wouldn’t they apply the same logic to whites or the rest of the rainbow of ethnic borrowers?

    This doesn’t make sense.

    • obits3 says:

      It is possible that the minority buyer’s did not have the same education level and family experience as the white buyers. In fact, isn’t the whole minority scholarship thing based on the idea that minorities have not had the same educational opportunities as whites and thus need others to “level the playing field”? The most objective way to see if there is discrimination would be to check two things:

      1. Compare the education levels of the whites who ACTUALLY USED Countrywide to the minorities.

      And

      2. Compare past home ownership (i.e. did they or their parents own a home prior to this loan).

      I doubt the courts would be able to get such specific information.

  11. Paladingo says:

    The racism in these comments is disgusting.

    Oh those BROWN people. They just don’t know anything about home ownership. Not like WHITE people.

    I seriously can’t believe that people are making sweeping racist generalizations like “POC aren’t used to home ownership” and “POC aren’t good with their money anyhow”. It’s disgusting.

    • AlphaLackey says:

      No more offensive than the latent racism in assuming that correlation must equal causation therefore the statistical disparity MUST be due to whitey being a bigot.

      • Paladingo says:

        Yes, because it hasn’t been proven over and over we live in a racist society, we don’t require countless laws and studies and legal fights to combat it, nope everything is hunky-dory, even when these people were specifically told (as per the article, did you even read it?) to target POC.

        When racism doesn’t exist anymore, you’ll know — POC will be telling you.

        • DanRydell says:

          You’re right that racism is not dead. But racists come in all colors. There are plenty of racist “POC”

          • jstlookinground says:

            Poor offended white people. How do they get through it.

            • AlphaLackey says:

              The same way poor offended black people do? By realizing that bigoted rhetoric is a mark of shame on the speaker, not the target?

        • Big Ant says:

          “even when these people were specifically told (as per the article, did you even read it?) to target POC.”

          No where did it say they were specifically told to target POC.

          “This discretion allowed Countrywide‘s employees and mortgage brokers to charge minority borrowers higher rates of interest than similarly-situated white borrowers.”

          Is a lot different than

          “Countrywide‘s employees and mortgage brokers were told to charge minority borrowers higher rates of interest than similarly-situated white borrowers.

    • PunditGuy says:

      Brown person here. Not seeing a lot of racism in these remarks. In aggregate, it’s probably true that financial literacy isn’t handed down from generation to generation if there wasn’t a lot of financial literacy to start with. That’s not saying that the POC are deficient in some way, just that they didn’t participate in the economy historically the same way whites did. (That’s mostly whitey’s fault, of course.)

      • Brunette Bookworm says:

        Very true. I was going to point out that saying POC have less home ownership experience isn’t racist, it’s pointing out a symptom of racism. The town I live in now didn’t allow black in until the late 1970s. Many cities and neighborhoods used discrimination to keep non-whites from purchasing homes. Some still do. That’s why there is an Equal Housing Act.

      • JuliB says:

        Well, my parents are terrible consumers of credit. I’d have better luck asking a random person on the street what to do. That said, I educated myself – it wasn’t that hard.

    • bhr says:

      Oh go screw yourself. Saying minority customers on the whole are less educated about home ownership and economics then white customers isn’t racist. Its a statement of reality based on experience and multiple studies.

      Historically minorities home ownership has lagged far behind white home ownership. White home ownership has been above 60% since a little after WW2, black and hispanic ownership is still sub 50%. That means that white customers do benefit from the experience of family members when buying their first home more often then non-white customers.

      FHA home buyer classes also showed similar disparities. I use to teach first time homebuyer classes for a non profit, and saw a much higher percentage of white customers, even in areas like Baltimore City. It was only when we reached out to the local black churches that we saw those numbers improve.

      As for Hispanic customers, is there any doubt that a group of (primarily) first and second generation Americans found themselves taken advantage of due to language and culture more then anything? We saw the same thing during the turn of the last century with Italian and Irish immigrants and fifty years later with Eastern Europeans. And it was often members of those groups doing the worst.

    • DanRydell says:

      Reality is racist.

      It’s an indisputable fact that blacks and latinos are on average less educated and less wealthy than white people in the United States. If you were looking to take advantage of people who are poor and uneducated, it would look like you’re disproportionately taking advantage of minorities even if you’re taking advantage of poor, uneducated white people at the same time.

    • tbax929 says:

      Fellow POC here, and I’m not seeing anything racist in the comments. They are correct. The lack of education about home ownership isn’t due to stupidity it’s a symptom of racism. When my parents wanted to buy a home in the 70s (not that long ago), there were communities where they weren’t allowed to buy.

      Don’t be so sensitive.

  12. jstlookinground says:

    I need to get out of this post lol. Ignoring or rationalizing racism is just as bad as being racist. White privilege at it’s best.

    • Baelzar says:

      Apparently just talking about or even noticing racism….is now racist.

    • bhr says:

      So what is a term like “white privilege” if not a racist term? Using a broad brush there aren’t you?

      • crashfrog says:

        It’s a description of reality. There really is an element of privilege that comes from being white in Western society.

        It’s not racist to point that out, but it’s white privilege to be white and claim to not have privilege.

  13. RogueWarrior65 says:

    So how does this mesh (I was going to say ‘jive’ but…) with the fact that groups like ACORN were threatening banks like Countrywide with charges of racism if they didn’t open up the mortgage floodgates?

    • PunditGuy says:

      That evil ACORN — so much power for a group that doesn’t exist anymore.

      Here’s how it jives: even if ACORN had the power to compel Countrywide to loan to dark people, Countrywide didn’t have to steer dark people toward subprime loans when they qualified for prime loans. That’s sort of the point of the lawsuit.

  14. RogueWarrior65 says:
  15. peebozi says:

    why do these people hate America? don’t they know the free market will take care of this?!?!?!

  16. peebozi says:

    all charges should be dropped because Country Wide was bought by BoA, therefore absolving both entities of any responsibility while still allowing both institutions to provide maximum value to their shareholders.

    why should corporations be required to adhere to any moral or ethical guidelines when they are in it for the money and nothing else. this is so unfair and it would have taken care of itself if the free market were allowed to operate unencumbered by so-called “morals” and “ethics”.