Thursday, August 5, 2010

FYI: IL AG Now Sues Countrywide for Race Discrimination

Attorney General Lisa Madigan filed the attached lawsuit against Countrywide, now a subsidiary of Bank of America, for unlawfully discriminating against African American and Latino borrowers in home mortgage sales, in violation of the Illinois Human Rights Act and the Illinois Fairness in Lending Act. The Attorney General filed her complaint (copy attached) in Cook County Circuit Court against Countrywide Financial Corporation; Countrywide Home Loans, Inc.; and Full Spectrum Lending, Inc., an arm of Countrywide that mostly sold subprime loans.

Madigan's complaint alleges that the former Countrywide entities supposedly steered African American and Latino borrowers into risky subprime mortgages more often than similarly-situated white borrowers. The complaint also alleges that minority borrowers paid more for mortgages across Countrywide's product line, including its prime loans. Significantly, Madigan's analysis of Countrywide loan data found that the racial disparities could not be explained by objective factors, such as borrowers' credit scores or debt-to-income ratios.

Madigan's lawsuit is asserted to be the result of a two-year investigation of Countrywide's lending policies and practices, including a statistical analysis of data from over 83,000 Countrywide mortgages originated in Illinois from 2005 through 2007. Madigan's office also interviewed former Countrywide employees and mortgage brokers, and spoke with Countrywide borrowers about their home loans.

As outlined in the complaint, Madigan's office asserts that their analysis of Countrywide's loan data found that the odds that African American and Latino borrowers would receive a higher-cost subprime mortgage from Countrywide were three times greater than those of white borrowers. In addition, Madigan's office claims their investigation found that Countrywide charged African American and Latino borrowers higher interest rates and fees on loans spanning the company's range of products, including its prime products, as compared with similarly-situated white borrowers.  The AG further asserts that the disparities in Countrywide's subprime sales and loan pricing were the result of Countrywide policies that gave employees and mortgage brokers almost unlimited discretion in the selection and pricing of loans.

The Attorney General's lawsuit asks the court to find that Countrywide engaged in a pattern and practice of discrimination, enter an injunction against Countrywide to permanently prohibit the company from discriminatory acts as described in the complaint, make restitution to all victims of Countrywide's discrimination, pay civil penalties of $25,000 for each violation of the Illinois Human Rights Act, and order any other relief that the court deems equitable.

This filing is the second lawsuit Madigan has brought against Countrywide. In 2008, she filed a consumer fraud lawsuit against the lender, and in November 2008, she participated in negotiations that resulted in an $8.7 billion settlement of that lawsuit with Bank of America.

As we previously reported, in July 2009, Madigan filed a lawsuit against Wells Fargo for violating the state's fair lending and civil rights laws, becoming the first state attorney general in the nation to sue a federally-chartered lender for its role in creating the foreclosure crisis. The Wells Fargo litigation is ongoing.

Let me know if you have any questions.  Thanks.


Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874


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