The Justice Department faces a daunting task of tracking down more than 210,000 alleged victims and determining how to compensate them, following last week's $335 million fair-lending settlement with Bank of America Corp.'s Countrywide Financial Corp. unit.
Minority borrowers who suffered the greatest harm from Countrywide's allegedly discriminatory mortgage-lending practices could be the most difficult to locate, observers say, because they are most likely to have lost their homes to foreclosure and then moved several times.
"It's going to be really difficult to find those families," said Janis Bowdler, a policy director at National Council of La Raza, a Latino civil-rights group.
The landmark case is also the first by the Justice Department that accuses a lender of steering borrowers to more-costly mortgages, creating novel and possibly difficult questions on setting monetary payments for some victims. For example, how should the government compensate a family that both lost its home and was unfairly steered into a more-costly subprime loan?
"It's not easy to calculate that kind of thing as a dollar amount," said Nina Simon, director of litigation for the Center for Responsible Lending. "No statistical model could compensate someone for that kind of harm."
The agreement, announced last Wednesday, was the largest residential fair-lending settlement in history. It resolved allegations that Countrywide and its subsidiaries engaged in a widespread pattern of discrimination against black and Hispanic borrowers from 2004 to 2008.
Some borrowers allegedly were charged higher fees and costs. Others allegedly were steered into costly subprime loans, even though they could have qualified for a prime mortgage, the type of loan offered to borrowers with the best credit histories.
Bank of America said it reached the settlement "to resolve issues about Countrywide's alleged historic practices" before it acquired the firm in 2008. The bank also said it discontinued Countrywide products and practices that "were not in keeping" with its commitment to fair and equal treatment of customers.
As the Justice Department's settlement administrator begins to track down victims, the recent experience of the Federal Trade Commission, which inked its own settlement with Countrywide last year, offers a possible road map.
Bank of America paid the FTC $108 million to settle charges that Countrywide took advantage of more than 450,000 distressed homeowners by inflating the cost of services relating to their defaults.
The FTC began mailing refund checks this summer, but 18 months after the agreement, the agency still holds about 25% of the money because it can't find some people. Officials there are also concerned that at least some victims haven't cashed the checks out of worries the refunds are part of a scam. The agency is preparing to conduct another round of searches for remaining victims.
The Justice Department is confident its settlement administrator "will be successful in locating the vast majority of the victims and is committed to ensuring that best efforts are made to do so," spokeswoman Xochitl Hinojosa said.
Once all found victims are paid, any remaining money won't be returned to the bank or transferred to government coffers. The funds instead will be distributed to organizations that provide credit and housing counseling in minority communities, Ms. Hinojosa said.
