On Wednesday The United States Justice Department announced a $335 million settlement with Bank of America stemming from discriminatory lending practices at Countrywide Financial, according to an article on cnn.com.
Eric Holder, the Attorney General, stated that a federal investigation revealed discrimination against greater than 200,000 qualified African-American and Hispanic-American borrowers during the peak of the housing market boom from 2004-2008. During that time these borrowers had qualified for prime loans, but instead were misled into the higher interest rate subprime loans.
These borrowers were generally first time home-owners who were thrilled about realizing the American dream of buying their own brand new home. Unfortunately, most of these victims were unaware that they had been duped into agreeing to the exceedingly more risky mortgages.
Essentially, they were the perfect prey for big time lenders such as Countrywide. Because these borrowers could not afford to make their interests payments as both the housing and financial markets plummeted they ended up paying on average tens of thousand dollars more in interest payments and were subject to prepayment penalties.
Additionally, although the discriminatory loans occurred throughout the nation, the greatest number, almost 30% occurred in California where Countrywide was located.
Finally, the money from the settlement will be split amongst the borrowers that were identified in the federal investigation.
Too Little Too Late?
It is good to see that these people will get some sort of compensation after they were unnecessarily misled into agreeing to mortgages that they had no business entering into.
The worst part is that many of these people lost their homes in the middle of the housing market meltdown. And even a settlement payment cannot make a family whole that was forced out of their home and forced to deal with the day-to-day stress of wondering where they would live just a short time after they believed that they had realized the American dream.
Nonetheless, it is about time that company, such as Bank of America, that was bailed out by the government be forced to use some of that money to bail out those that they wronged.
I know that the harmful effects of these loans during the past 4-7 years can never be righted, but I hope that these settlement payments will serve as a nice substitute and get these families back on track. Hopefully, in the form of a new home.
What do you think?
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