Senators fault the Justice Department for its acceptance of a $355 million settlement between the agency and Bank of America over alleged mortgage lending bias by the bank’s Countrywide Financial Corporation subsidiary. The lawmakers on the Judiciary Committee argue that payments going to some borrowers aren’t enough to remedy damages.
The settlement focuses on race, alleging that some black and Hispanic borrowers between 2004 and 2008 were charged higher interest rates and fees because of their race, not because of their credit history or ability to pay the premiums. The pact also alleges that minority borrowers with strong credit were targeted and steered into subprime loans when similarly qualified white borrowers were awarded prime loans.
Lawmakers took out their ire on Thomas Perez, assistant attorney general of the DOJ’s civil rights division. Perez acknowledges the shortcomings in the settlement, explaining it was not a “home run,” but he defends the move saying the DOJ has set up a task force to investigate and pursue illegal financial activity as a result.
That explanation doesn’t sit will with Sen. Charles Grassley (R-IA), the panel’s ranking Republican. “The department’s message is crime does pay,” Grassley says. “Light settlements and no prosecutions not only do not deter. They invite crimes of this sort to occur against similar future victims,”
Grassley addresses the estimated average settlement of $1,700 per victim among the more than 200,000 blacks and Hispanics involved in the settlement.
Perez responds that banks complain the DOJ is too hard on them, explaining that the goal of the Countrywide pact, which he says could grant some victims “tens of thousands” of dollars, was to maximize the amount that goes directly to victims
When asked by Grassley why the settlement doesn’t include removal of executives who knew of illegal practices at the banks, Perez answers, “That’s an idea worth considering.”
As part of the settlement, borrowers who were victims of higher fees will receive at least $700 but no more than $2,000, while borrowers who were steered into expensive subprime loans will receive considerably more depending on a case-by-case analysis of what they would have saved in a lower interest rate loan.