Discrimination settlement holds subprime lenders accountable
OPINION - Since President Obama took office, this administration has worked to tackle the foreclosures that are harming families and devastating our communities...
As we continue to recover from the worst economic downturn since the Great Depression, it is clear that every American family has been touched in some way by the recession — a recession sparked in many ways by the irresponsibility and recklessness on Wall Street over the last decade.
From Ponzi schemes to health care scams to mortgage fraud, too many Americans have experienced the pain of this crisis in one form or another. African-American and Latino families have been hit especially hard. Between 2005 and 2009, fully two-thirds of median household wealth in Hispanic families was wiped out.
And from Queens, New York, to Oakland, California, strong, middle class African-American and Hispanic neighborhoods saw nearly two decades of gains reversed in a matter of months. Most outrageously, these communities so devastated by the crisis were also targets of many of the practices that helped cause it — including discrimination, predatory lending and fraud.
One of the federal government’s most important tasks is to hold accountable those responsible for such abuses and that is what this Administration has done in achieving the largest fair housing discrimination settlement in U.S. history — a $335 million settlement with Countrywide on behalf of over 200,000 African-American and Latino families across the country .
At the core of this case is a simple story: If you were a qualified African-American or Hispanic borrower who received a mortgage from Countrywide, you likely paid more simply because of the color of your skin.
Moreover, if you were African-American or Hispanic, you were far more likely to be steered into an expensive and risky subprime loan than a white borrower with equal creditworthiness and financial situation.
As a result of these predatory practices, the odds of an African-American or Hispanic borrower receiving a subprime loan instead of a prime loan were more than twice as high as those for non-Hispanic white borrowers with similar profiles. Indeed, Countrywide forced over 10,000 Hispanic and African-American borrowers into subprime loans — even though non-Hispanic white borrowers with similar credit qualifications were able to obtain prime loans.
As a result, minority borrowers who were steered into subprime loans paid, on average, thousands of dollars more for their loans and experienced additional harm as a result of increased risk of prepayment penalties, credit problems, default and ultimately foreclosure. Nothing can undo the damage that hard-working, responsible families suffered as a result of these outrageous practices.
However, the $335 million in relief for victims of discrimination will not only address their financial loss, it will make it abundantly clear that this kind of behavior will not be tolerated.
Since President Obama took office, this administration has worked to tackle the foreclosures that are harming families and devastating our communities.
We’ve pushed the banks hard to keep responsible families in their homes — and because we have, foreclosure notices are down 45 percent since early 2009. The Federal Housing Administration (FHA) has withdrawn the approval of over 1,600 lenders to participate in FHA programs — more than four times the number during the entire tenure of the previous Administration.
In 2009, President Obama formed the Financial Fraud Enforcement Task Force, chaired by the Justice Department, to wage an aggressive and coordinated effort to investigate and prosecute devastating financial crimes, like this one.
And, through the Wall Street reform law President Obama signed into law last year, we created a Consumer Financial Protection Bureau — the sole mission of which is to protect ordinary Americans from abuses like these.
With this fair housing discrimination settlement, we are ensuring that help will go to some of the families who need it most. We are telling irresponsible banks and mortgage servicers that the unfair practices of the past will no longer stand.
And most of all, we are reaffirming the basic tenets of who we are as Americans and what we believe. That this country succeeds when everyone gets a fair shot, when everyone does their fair share, and when everyone plays by the same rules.
Eric Holder is the attorney general of the United States and Shaun Donovan is the secretary of Housing and Urban Development.
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