Deadline nears for Countrywide discriminatory lending settlement

By Jamey Dunn

Minority borrowers in Illinois may be eligible for compensation under a settlement with now-defunct Countrywide Financial over its discriminatory lending practices. But they have only a few days left to submit paperwork to get a piece of the settlement.

Bank of America, which bought Countrywide in 2008, has agreed to pay $335 million to customers affected by the racial discrimination committed by the former lender when making home loans. The U.S. Department of Justice sent letters and claim forms to the more than 200,000 people nationwide who are eligible for compensation. To receive a check, those eligible must submit their forms by March 29, this Friday.

“The relief obtained in this settlement is crucial for borrowers who’ve paid far too high a price for the risky, discriminatory lending practices Countrywide employed in the buildup to the housing collapse,” said Illinois Attorney General Lisa Madigan, who filed a discrimination suit against Countrywide in 2011. “I encourage anyone who has received information from the settlement administrator to act quickly to submit their claim before the deadline.” Madigan’s suit was ended by the federal settlement, which calls for at least $20 million to go to Illinois.

The DoJ says during that between 2004 and 2008, Countrywide lenders charged minority borrowers more in fees and other costs. According to the settlement, black and Hispanic borrowers were also more than twice as likely to end up with expensive subprime loans with ballooning interest rates than white borrowers with similar credit scores. “The steered Hispanic and African-American borrowers [who got subprime loans] paid, on average, thousands of dollars more for their loans and were subject to possible prepayment penalties, increased risk of credit problems, default, and foreclosure,” said the federal complaint.

The settlement applies to 41 states and the District of Columbia. But the DoJ focused in on Chicago as one of the examples used in its complaint against Countrywide. “In 2007, Countrywide charged a retail customer in Chicago borrowing $200,000 on average about $795 more in non-risk-based pricing adjustments if he were Hispanic, and an average of about $460 more if he were African-American, than the average amount charged to a non-Hispanic white borrower,” the compliant said. The DoJ said that at the same time, African-American and Hispanic borrowers in Chicago were also paying about $1,000 more in fees than white borrowers on the same kind of loan. The letters sent to those eligible for the settlement included a minimum amount that borrowers can expect to receive. The payouts range from $200 to $15,000. The higher amounts will go to the more than 12,000 people who were given sub-prime loans despite their solid credit histories. The final amount each borrower would receive will be determined by how many people respond by the deadline, after which the settlement will be sliced up among those that submitted to proper paperwork.

Borrowers who have questions, need help with their submission or need a new claim form should contact Independent Settlement Administrator Rust Consulting Inc, a contractor hired by DoJ to oversee the settlement. The administrator can be reached at (800) 842-5148 or by email at countrywide.settlement@usdoj.gov.

Illinois residents can also call Madigan’s Homeowner Helpline at (866) 544-7151. For more on the settlement, see Illinois Issues February 2012.

The Countrywide discriminatory lending settlement is not to be confused with the $26 billion foreclosure settlement approved in 2012. That agreement came in response to the nation’s largest lenders engaging in sloppy and sometimes fraudulent foreclosure practices, such as signing off on documents without verifying information, a practice known as robo-signing. Illinois is expected to receive $1 billion in that settlement, and most of the money is supposed to go toward keeping struggling borrowers in their homes.