Illinois Attorney General Lisa Madigan's office sued former mortgage giant Countrywide Financial Corp. this week for allegedly using discriminatory lending practices for minority borrowers - violations of the Illinois Human Rights Act and the Illinois Fairness in Lending Act.
The lawsuit is the result of a two-year investigation of Countrywide’s lending policies and practices in place during the years directly preceding the collapse of the housing market. The investigation revealed African-American and Latino borrowers from 2005 to 2007 were much more likely to be given subprime loans by lenders compared with whites in similar financial situations.
The lawsuit alleges that a statistical analysis revealed that the company charged Latino and African-American borrowers more interest and fees on certain mortgages.
Countrywide Financial, the largest mortgage lender in Illinois from 2004 to 2006, is now an arm of Bank of America Corp. In a statement, Bank of America said it was "disappointed" with the attorney general's decision to sue over practices that preceded its taking ownership of the company in 2008.
"We have fully cooperated with their investigation and have pointed out significant flaws in the methodology which we believe has been used as the basis for these claims," the bank said in a statement.
The lawsuit estimates that the company's practices caused about 6,000 African-American and Latino borrowers to be steered into subprime mortgages and in some cases charged higher prices for their mortgages. Overall, the attorney general's office found that African-American and Latino borrowers were three times more likely than white borrowers to receive a higher-cost subprime mortgage.
In 2008, Illinois, California and at least six other states reached an $8.8 billion settlement with Countrywide stemming from a lawsuit claiming the company and its executives defrauded borrowers.
