Bank to pay minority borrowers $2.85 million
Freddie Allen | 10/14/2013, 10:47 a.m.
WASHINGTON (NNPA) – Chevy Chase Bank agreed to pay $2.85 million to Black and Latino borrowers, following allegations of discriminatory home lending practices. The Maryland-based bank joins Wells Fargo and Bank of America as banking institutions that paid out million dollar settlements in class action lawsuits following the housing crisis.
According to the complaint filed by the Justice Department, Chevy Chase Bank steered Blacks and Latino borrowers into home loan products that often cost more than loans that were offered to Whites with similar backgrounds. In 2009, Capitol One purchased Chevy Chase Bank. The settlement covers loans initiated by Chevy Chase Bank and does not call into question Capitol One’s mortgage lending practices.
In 2011, Bank of America agreed to pay $335 million to settle claims against Countrywide Financial Corporation of mortgage lending discrimination. Bank of America purchased Countrywide in 2008, a move that many industry insiders continue to question.
The banks racial problem wasn’t limited to mortgages. Last month, Bank of America Corp. was ordered to pay $2.18 million to 1,147 Black job applicants because its discriminatory hiring blocked qualified candidates of color from getting jobs, the U.S. Department of Labor said on Monday.
An administrative law judge at the Labor Department awarded back pay and interest to former candidates for teller and entry-level administrative and clerical positions at Charlotte, N.C., the bank’s national headquarters.
The judge ruled that Bank of America’s “unfair and inconsistent selection criteria” led to the rejection of qualified Black job candidates. Approximately $1.22 million will go to 113 people who were turned down for jobs between 2002 and 2005, and another $964,000 to 1,034 people who were turned away in 1993.
In 2012, Wells Fargo paid $175 million after brokers affiliated with the nation’s largest mortgage lender were accused with discriminating against African American and Latinos who sought home loans from 2004 to 2009. Justice Department officials said that minority borrowers that were shuffled into subprime loans would receive an average of $15,000.
The subprime loan industry, once seen as a gateway to homeownership, is now often blamed for contributing to the greatest loss of African American wealth in history.
Subprime loans were five times more likely to occur in Black neighborhoods compared to White neighborhoods, according to data from U.S. Department of Housing and Urban Development.
“A disproportionate number of subprime loans were made to African American borrowers who were otherwise eligible for prime loans. That was part of the problem,” said Bernard Anderson, economist and former assistant secretary for the Employment Standards Administration at the Labor Department.
“These were people based upon their income, their previous repayment record, their [credit] score, should not have been given subprime loans, but they were dragged into the subprime category because of the predatory lending practices of the financial institutions.”
According to a study titled Racial Segregation and the American Foreclosure Crisis published in the American Sociological Review, foreclosures were often concentrated in those same neighborhoods where Blacks were targeted for subprime loans.
“Segregation therefore racialized and intensified the consequences of the American housing bubble. Hispanic and black home owners, not to mention entire Hispanic and black neighborhoods, bore the brunt of the foreclosure crisis,” the report stated.