The government would like to repay more than 200,000 minority borrowers who allegedly paid unfairly high interest rates and fees on mortgages, but first the government needs to find them.
After a historic $335 million settlement with Bank of America's Countrywide unit -- the largest housing discrimination settlement in American history -- the Department of Justice is searching for more than 210,000 minority borrowers whom Countrywide allegedly charged higher interest rates and fees in the lead-up to the housing crisis between 2004 and 2008, according to The Wall Street Journal.
These borrowers could be hard to find because some of them have lost their homes and moved several times, according to the WSJ. Since suffering is hard to quantify, it also will be difficult to determine how much to pay families that were brought to financial ruin and forced to leave their homes, the WSJ reports.
The Justice Department's $335 million settlement with Bank of America is significantly larger than the $30 million total for all previous fair-lending settlements with the Justice Department, according to Bloomberg News. The Justice Department will start to send checks to victims in about two years, according to a Justice Department official interviewed by Bloomberg.
The Justice Department alleged in its lawsuit against Countrywide that many of the minority borrowers qualified for traditional mortgages but were steered to more expensive subprime loans, according to Reuters.
"The victims had no idea they were being victimized. They were thrilled to have gotten a loan and realize the American dream," said Thomas Perez, head of the Justice Department's civil rights division, according to Reuters. "This is discrimination with a smile."
The government has been taking an increasingly aggressive stance toward lenders that some allege created the subprime mortgage crisis. The Securities and Exchange Commission recently sued six former executives at Fannie Mae and Freddie Mac for misleading the public about their exposure to subprime loans as the housing bubble deflated. The Federal Insurance Deposit Corporation reached a $64 million settlement with three top executives at Washington Mutual earlier this month for their role in the subprime mortgage disaster. A coalition of state attorneys general and the Department of Housing and Urban Development also are close to reaching a $25 million settlement with Bank of America, JPMorgan Chase, Wells Fargo, Citibank, and Ally Financial.
Though victims may eventually get some money back, critics allege that these settlements do not go far enough since the banks do not admit wrongdoing and the settlement amount is sometimes pocket change. Federal judge Jed Rakoff threw out a $285 million settlement between the SEC and Citigroup last month, alleging that the SEC's "long-standing policy, hallowed by history but not by reason," of settlements in which banks do not admit wrongdoing betrays the public interest by leaving the facts unknown.