The NAACP’s allegations are totally unfounded and reckless. We have never tolerated, and will never tolerate, discrimination in any way, shape or form in any of our business practices, products or services. – Wells Fargo Spokeswoman – 2009
Back in 2009 the National Association for the Advancement of Colored People (NAACP) filed a class action suit to stop lenders from engaging in "systematic, institutionalized racism in making home mortgage loans.” The NAACP suit specifically named: Ameriquest, Wells Fargo, Fremont Investment, Option One Mortgage (H&R Block,) WMC Mortgage, Countrywide, Long Beach Mortgage, CitiGroup, BNC Mortgage, Accredited Home Lenders, Encore Credit (Bear Stearns,) First Franklin, HSBC, and Washington Mutual as modern practitioners of discrimination.
As we start the year 2012, the largest residential fair-lending settlement in American history is starting to take place. Bank of America has agreed to pay $335 million to settle federal allegations that its Countrywide unit discriminated against minorities. Due to the NAACP’s activism, the U.S. Justice Department carried out years of investigations that ultimately concluded Countrywide loan officers and brokers charged higher fees and rates to more than 200,000 minority borrowers than they did to White borrowers who posed the same credit risk. The Justice Department’s investigations also found that Countrywide steered more than 10,000 minority borrowers into costly subprime mortgages when White borrowers with similar credit profiles received regular loan portfolios.
Contrary to the protestations of America’s lenders our country’s unique racism continues. Black buyers often enter a separate and unequal lending universe. The mortgage companies the NAACP filed suit against accounted for half the loans given to Black middle-income borrowers in 2005 and 2006. Minority borrowers paid hundreds or thousands of dollars more to get a mortgage than did similarly qualified White customers. Justice Department officials said, “The victims had no idea they were being victimized. They were thrilled to have gotten a loan and realize the American dream.”
With the impetus of the NAACP discrimination lawsuit the Justice Department created a division to focus exclusively on banks and mortgage brokers suspected of discriminating against minority mortgage applicants, a type of litigation that requires extensive and complex analysis of data. Working with bank regulatory agencies and the Department of Housing and Urban Development, the unit reached settlements or filed complaints accusing a lender of engaging in a pattern or practice of discrimination. The Federal Reserve first detected statistical discrepancies in the loans Countrywide was making and referred the matter to the Justice Department in early 2007.
Those proven to be victims of Countrywide’s deliberate discrimination will get to divvy up $335 million, an average of roughly $1,700 per borrower. The compensation rate will depend on who originated the loan and whether the borrower was steered into a subprime product. Justice Department officials say that “checks should start going out to qualified borrowers in about 24 months.”
For those wanting to just meld into the mainstream, note that the case represents the first time that the Justice Department alleged and obtained relief for borrowers who were steered into loans based on race or national origin. The NAACP released a statement saying Bank of America "takes one more important step toward creating a fairer lending environment for consumers."
Ironically, over recent years it has become daily talk fare among African Americans to question “the NAACP’s relevance in modern American life.” The mortgage industry discrimination suit shows the idiocy of such talk. Were it not for the NAACP, the government wouldn’t have investigated embedded lending practices, and Countrywide would not be paying victims of its 2004 to 2007 discriminatory practices. What does it take for us to realize that racism is alive and living in America and we need all the forces we can muster? The NAACP’s membership categories range from $30 “Annual” to $750 for “Lifetime.” How many people being compensated by the settlement will send funds to: NAACP Memberships, 4805 Mt. Hope Drive, Baltimore, Md. 21215?
(William Reed is available for speaking/seminar projects via BaileyGroup.org)
William Reed Columnist