Bank of America (BAC) made history today by making a $335 Million settlement addressing claims that its Countrywide mortgage arm discriminated against Black and Hispanic borrowers during the height of the housing boom. This is in addition to the $108 Million Countrywide agreed to pay out in damages at the beginning of the controversy in 2010
The proposed settlement is the largest fair-lending settlement in history, and puts Bank of America in the records book for all the wrong reasons. The previous record-holder was AIG, who settled a fair-lending suit for $6.1 Million. Although the settlement looks like it will end this controversy, it has yet to be approved by a California judge.
The original suit alleged that Countrywide knowingly pushed sub-prime bad credit loans on minority groups that would otherwise qualify for more traditional loans. Evidence of this type of “predatory” lending have been seen throughout the banking industry, but was especially common at Countrywide.
Bank of America has stressed that it is innocent of any wrongdoing, as these practices occurred during 2004-2008, before they were acquired. However, it looks like the big bank wants to avoid any more controversy, even if they weren’t directly involved. However, the farther Bank of America can distance itself from Countrywide, the better, as it’s acquisition is one of the main reasons why analysts believe the stock has lost over two-thirds of its value over the past year.
However, this settlement may soon be dwarfed by even bigger legal troubles. Bank of America is currently under investigation for questionable foreclosure practices, and analysts are forecasting that a settlement in that case could cost Bank of America as much as $20 Billion dollars, and could put the once-prominent bank into serious financial trouble.