When Davelle Reggans heard that her former lender had settled a federal lawsuit claiming discrimination against African-American and Latinos for $335 million, the story sounded familiar.
Reggans, an African-American, had great credit and no debt when she took out a Countrywide mortgage on a 1,200-square-foot condo in Aurora. She expected a low, fixed-rate loan. But instead, the broker she trusted surprised her at closing with a mortgage that kept rising, way past the original 6.3 percent.
“I was totally green,” she says now. “I thought the person was my friend. I’d known her for years.”
Blacks and Hispanics in Colorado have been denied mortgages at far higher rates than whites, according to federal mortgage data for 2010 that was disseminated by the Center for Advancing Health at Harvard.
But now, both Wells Fargo and Bank of America, which later purchased Countrywide, have agreed to pay a combined half billion dollars to settle allegations of discrimination. Both have denied wrongdoing. Both Wells Fargo and Countrywide allegedly allowed brokers to earn more money by steering clients to more expensive loans, including subprime loans with rising rates.
These are just two of numerous lawsuit settlements, programs and regulators’ orders now beginning to help people who lost their homes to foreclosure, were shunted into a terrible loan, or need to refinance but owe more than their homes are worth.
The programs, which benefit people of all races, offer the possibility of re-financing at today’s low rates, better treatment by lenders, and even cash for people who were wronged.
But each possibility has confusing rules, and often, people must apply. Also, the opportunities for relief continue to proliferate. So housing experts advise consumers to contact the Colorado Foreclosure Hotline at 1-877-601-4673 or www.coloradoforeclosurehotline.org for help sorting through which program might help them the most.
Reggans eventually lost her condo but is back in good financial shape today. She received her loan before the 2004 cut-off date in the Countrywide case, so she won’t qualify for compensation.
Shaun Donovan, U.S. Secretary of Housing and Urban Development, said that federal government isn’t finished investigating banks.
“We will not accept families losing their homes when the banks aren’t even reviewing the paperwork,” Donovan said in an interview with Colorado Public News during a visit to Colorado. “We’re not going to accept targeting Latino and African-American homeowners with outrageous fees simply because of the color of their skin.”
Corrine Fowler of the Colorado Progressive Coalition objects to the settlements as far too small to make up for the damage done to so many homeowners. The coalition, which advocates for minorities and other groups, is pushing a state ballot issue in November that would require lenders to prove they hold a mortgage on a house before foreclosing on it. Banks oppose the measure.
The NAACP also is pursuing legal action against 15 lenders nationwide. The organization found that blacks in Colorado had 40 percent of the subprime mortgages even though they are only 4 percent of the state’s population.
The following details some of the numerous actions against mortgage lenders that are now providing some relief:
Citi, Chase, Bank of America, Wells Fargo and GMAC/Ally Bank settled a massive national case of mortgage fraud in foreclosures. In Colorado alone, 22,000 people wronged by these lenders can apply for a share in $200 million, and may lose out if they do not apply. These financial institutions are now allowing refinancing to homeowners [PDF] who owe more than their homes are worth.
Veterans may get even more from this settlement, due to special protections under federal law for military personnel moving under orders. Some who were wrongly foreclosed on will get payments for lost equity plus $116,785.
Bank of America spokesman Richard Simon said his company dropped subprime loans and other Countrywide practices after purchasing Countrywide, and moved to help homeowners and stabilize neighborhoods. Bank of America also has begun telling 200,000 mortgage holders they may qualify for reduction of their principal, he said.
Countrywide’s discrimination settlement affects 200,000 blacks and Latinos nationwide, who should start receiving payments of a few hundred to the low thousands this summer. They were charged more for their mortgages than whites with comparable credit, according to the federal complaint. Countrywide brokers also allegedly steered another 12,000 minorities into sub-prime loans, even though they qualified for prime loans, from 2004 to 2008.
“We put together a compelling case for system-wide discrimination,” said Eric Halperin, special counsel for fair lending at the U.S. Department of Justice, regarding the Countrywide case. Countrywide had even caught the discrepancy through its own monitoring, yet did not fix the problems for customers who were wronged, according to court documents.