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BofA to pay $335 million to settle Countrywide mortgage bias probe

Countrywide

The post has been updated. See below for details.

Bank of America Corp. has agreed to pay $335 million to settle allegations that Countrywide Financial, which it now owns, systematically discriminated against minority home-buyers at the peak of the U.S. housing boom.

The Justice Department and the Illinois attorney general had alleged that Countrywide charged higher interest rates and other housing-related fees to African American and Latino home buyers than to white applicants with comparable income levels and credit scores.

The company frequently pushed minorities into risky subprime loans rather than into safer prime loans. The collapse of the subprime market beginning in 2007 sparked the U.S. mortgage bust and the brutal recession whose lingering effects continue to reverberate nationwide.

The $335 million will be distributed to alleged Countrywide victims. An independent monitor will be appointed to contact potential recipients and distribute the proceeds to them. People who think they may qualify for compensation can seek information by emailing countrywide.settlement@usdoj.gov.

A Bank of America spokesman would not discuss specifics of the settlement but said the alleged wrongdoing occurred before the giant bank bought Calabasas-based Countrywide.

“I want to make it very clear this pertains to Countrywide activities prior to Bank of America's acquisition,” said the spokesman, Dan Frahm. “Bank of America practices were never in question.”

[Updated at 12:19 p.m. Dec. 21: Frahm also issued this statement on behalf of Bank of America: “We reached this settlement to resolve issues about Countrywide’s alleged historic practices that occurred before Bank of America acquired the company.  Bank of America’s practices are not at issue.

"We are committed to fair and equal treatment of all our customers, and will continue to focus on doing what’s right for our customers, clients and communities. We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues."]

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Bank of America, Calpers settles suit over Countrywide

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-- Walter Hamilton

Photo credit: Los Angeles Times

4 House members got Countrywide VIP loans, Rep. Darrell Issa says [Updated]

House Oversight Committee Chairman Darrell Issa
This post has been updated. See below for details.

Four current House members received special VIP loans from Countrywide Financial Corp., and their names have been forwarded to the Ethics Committee for possible action, Rep. Darell Issa (R-Vista) said.

Issa, who chairs the House Oversight and Government Reform Committee, said an ongoing  investigation by his panel discovered the information. He did not name the members in referring the matter to the Ethics Committee in a letter Friday.

"Testimony and documents show that Countrywide used the VIP program to build relationships with government officials and others positioned to advance Countrywide's business interests," Issa wrote to Ethics Committee Chairwoman Jo Bonner (R-Ala.) and top Democrat Linda T. Sanchez (D-Lakewood). The loans often came at lower interest rates and fees than were available to the public.

A spokesman for the Ethics Committee would not comment on the letter. The committee usually does not talk about specific allegations or referrals until it reaches a finding.

The oversight committee received about 100,000 pages of documents related to the VIP loan program after issuing a subpoena in February to Bank of America, which now owns Countrywide, the former Calabasas lender. The VIP program also was known as "Friends of Angelo," a reference to Countrywide's former Chief Executive Angelo R. Mozilo.

Under Mozilo, Countrywide helped fuel the subprime mortgage boom and cultivated relationships with Washington policymakers. Last year, Mozilo agreed to a $67.5-million settlement of civil fraud and insider-trading allegations by the Securities and Exchange Commission.

Although Issa's letter did not name the current House members, Rep. Edolphus Towns (D-N.Y.) publicly has acknowledged receiving two mortgages from Countrywide. Staffers for Towns have said he doesn't believe the loans came with any special benefits.

[Updated at 12:42 p.m., Dec. 19: Towns spokesman Charles Lewis said the lawmaker was not involved in a VIP program at Countrywide and received no benefits that were not available to everyone else.]

In 2009, the Senate Ethics committee cleared Sen. Kent Conrad (D-N.D.) and former Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) of violating rules in receiving VIP mortgages from Countrywide.

The senators said they didn't think they were getting any special treatment. But the committee said they "should have exercised more vigilance" in their dealings with Countrywide to avoid the appearance of preferential treatment.

The House Oversight Committee has been investigating the Countrywide VIP program since 2008. The committee issued a report last year finding that Countrywide made 173 preferential mortgages over about a decade to employees of housing finance giants Fannie Mae and Freddie Mac, which purchased many of the company's loans.

RELATED:

Senators cleared in Countrywide ethics probe

Countrywide's Angelo Mozilo made exceptions for VIP mortgages, exec testifies

Countrywide made preferential loans to Fannie Mae and Freddie Mac employees, congressional panel finds

 -- Jim Puzzanghera

 Photo: House Oversight Committee Chairman Darrell Issa. Credit: Getty Images

California, Nevada team up to investigate foreclosure fraud

Atty. Gen. Kamala Harris to join California's foreclosure probe with Nevada's investigation
California and Nevada, two states at the heart of the nation’s housing crisis, will join forces to investigate allegations of foreclosure fraud and other types of mortgage improprieties.

The agreement to share resources and work jointly is the latest sign that the nation’s state attorneys general want to be out front in cracking down on bank practices the housing crisis — from the selling of mortgage-backed securities to the handling of foreclosures.

At a joint news conference in Los Angeles on Tuesday, California Atty. Gen. Kamala D. Harris and Nevada Atty Gen. Catherine Cortez Masto said their offices would share litigation strategies and evidence would link their offices' civil and criminal teams.

The announcement comes less than a week after Massachusetts said it was suing the nation’s five largest mortgage servicers over alleged foreclosure illegalities. The move marked the first such litigation to be filed by a state.

Harris' office has opened a number of its own probes of the mortgage business. Investigators have subpoenaed information from Fannie Mae and Freddie Mac as part of a wide-ranging inquiry into lending and foreclosure practices in the state, The Times has previously reported. Her office also is investigating Bank of America and its mortgage arm Countrywide Financial, along with Citibank, seeking information on their sale of mortgaged-backed securities in California.

The new alliance between Harris and Masto comes as banks are working to strike a deal with a coalition of attorneys general who are working to seek relief for consumers allegedly wronged by faulty mortgage servicing and foreclosure practices.

Harris formally withdrew from those talks earlier this year. Masto has said Nevada officials would evaluate any proposal the talks might produce but would also push ahead with their own work. New York, Delaware, Kentucky and Minnesota also have signaled they are unhappy with the direction of the talks with the banks. All of those states have expressed concern that the banks could be let off too easily.

ALSO:

Banks' foreclosure activity picks up

California AG subpoenas Freddie, Fannie

BofA settles mortgage suit for $315 million

-- Alejandro Lazo

Photo: California Atty. Gen. Kamala D. Harris. Credit: Brian van der Brug/Los Angeles Times

CalPERS, other investors, settle suit against Countrywide, BofA

AngeloatcourtIrfanKhan
California's giant public pension fund and 15 other large investors settled lawsuits accusing former mortgage goliath Countrywide Financial Corp. of costing them billions of dollars in stock losses by failing to disclose the severity of the risks posed by the easy-money loans the Calabasas lender handed out during the housing boom.

A filing Monday in U.S. District Court in Los Angeles disclosed the confidential settlement. The filing did not reveal how much Bank of America Corp., which acquired Countrywide in 2008 and was also a defendant in the case, would pay to the California Public Employees' Retirement System and the other plaintiffs.

Bank of America's spokeswoman for legal affairs, Shirley Norton, declined to comment. An attorney for CalPERS and the other 15 investors didn't return a call Tuesday, and CalPERS officials declined to describe the settlement.

The 16 big investors, mostly pension and mutual funds, were among 33 plaintiffs who opted not to participate in a $624-million settlement of class-action litigation that U.S. District Judge Mariana R. Pfaelzer approved in February.

The opt-outs believed the proposed settlement was "shockingly cheap," Columbia University securities law expert John C. Coffee said at the time, citing a discussion with one of the lawyers representing those institutions.

Seventeen additional institutional investors who decided against participating in the February settlement still have claims pending in the case.

This week's settlement, if approved by Pfaelzer, would end the 16 plaintiffs' claims against Countrywide, Bank of America, and former Countrywide executives Angelo R. Mozilo, David Sambol and Eric P. Sieracki.

Accounting firm KPMG, which had audited Countrywide's books, is also a defendant in the case but did not settle with CalPERS and the other funds. It was a participant in the $624-million settlement finalized in February.

Bank of America, based in Charlotte, N.C., has struggled to put Countrywide's woes behind it since it shelled out $2.5 billion in stock for what was then the country's largest mortgage lender.

After running up more than $30 billion in losses on its investment, Bank of America still has undetermined liabilities outstanding for claims against soured Countrywide loans and the mortgage securities that were backed by them.

The Countrywide troubles have caused regulators to pressure Bank of America to increase its capital cushion against losses, and investors have punished the bank's stock, which has declined by 59% this year. Bank of America closed Tuesday down 12 cents, or 2.2%, at $5.37.

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-- E. Scott Reckard

Photo: Dark glasses can't conceal Countrywide Financial co-founder Angelo Mozilo. Credit: Los Angeles Times / Irfan Khan

 

Bank debit card fee plans face Justice Dept. antitrust review

Bank of America

The Justice Department said Tuesday it is reviewing banks for possible antitrust violations in decisions to charge fees for debit card use.

The department is "reviewing the statements and actions by banks and their trade associations regarding possible increases in consumer fees for using debit cards," Assistant Atty. Gen. Ronald Weich wrote to Rep. Peter Welch (D-Vt.).

"Please be assured that if it finds that individuals, banks or other parties may have violated the antitrust laws, the Department will take appropriate action," Weich said in the letter, which was released by Welch.

Following a flurry of announcements last month of possible debit card fees, Welch asked Atty. Gen. Eric Holder to investigate whether banks and trade associations engaged in price signaling or collusion in reaction to new federal limits on the amount that large financial institutions can charge retailers for processing debit card transactions.

Because of the limits, which took effect Oct. 1, Wells Fargo & Co. and JPMorgan Chase & Co. began testing debit card fees for their customers in some states. And Bank of America said it would begin charging some customers a $5 monthly fee for debit card use.

All have since abandoned those plans amid outrage from consumers and politicians.

“While big banks like Bank of America beat a hasty retreat on their debit card fee strategies, I have no doubt that they will continue their quest to dig deeper into the pockets of struggling consumers," said Welch, who helped lead the push to include the debit fee limits in last year's overhaul of financial regulations. "As they consider their next move, they should be aware that there is a cop actively on the beat.”

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Debit cards poised to get much costlier

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BofA debit card fee prompts animosity from coast to coast

-- Jim Puzzanghera in Washington

Photo: The Bank of America building in downtown Los Angeles: Credit: Reuters.

Bank of America says it's lending more to small business

Bank of America

That Bank of America TV commercial featuring the Pink’s hot dog stand as a sign of its long history of lending to small business was cited in a Times article this week, and BofA wasn't exactly happy about it.

The article used the ads as an example of the chasm between big banks that tout their lending to small business, and the small-business owners who say they cannot get the loans they need to expand.

Loans to small business dropped 0.3% in the three months ended June 30, according to the SBA’s Office of Advocacy. But Bank of America’s small-business lending increased during that same period, according to bank spokesman Jefferson George.

George said Bank of America loaned $7.8 billion to U.S. small businesses in the first half of 2011, a 35% increase from the same period last year.

That number includes more than $1.2 billion in loans to small businesses in California, George said.
He conceded that bank lending is down overall from the days before the financial crisis, but said that is largely because there isn’t the same consumer demand.

"We're trying to make every good loan we can, but the interest isn't as strong as it had been pre-recession," he said. "The economy is challenging everyone, and we're seeing that in loan demand."

But, he said, the bank is hiring small-business bankers across the country to advise small businesses and help them grow their companies -- it aims to hire 1,000 by the middle of next year.

Already, George says, Bank of America’s loans have helped some businesses hire. One was Sliding Door Co. in Chatsworth. The company, which makes doors for closets, room dividers and offices, bought a 25,000-square-foot building, essentially doubling its space, and plans to add 20 employees in the next few years. The loan was a SBA 504 commercial real estate loan with Bank of America.

Loans made through the SBA are typically for borrowers who might otherwise have trouble getting a loan through traditional banks. The SBA guarantees a portion of the loan, making it more appealing to banks.

Mark Herter, chief executive of Farmers Insurance Group Federal Credit Union in Los Angeles, says it might make more sense for small businesses frustrated with the loan process to go to small banks and credit unions such as his.

"Many credit unions do small-business loans and are happy to consider 'smaller' loan amounts," he said. "That is our market."

Big companies go to big banks for loans -- small businesses having trouble finding financing should turn to credit unions, he said.

"When given a chance, a large bank commercial loan department will gravitate to larger loan application amounts than small ones. If GM wanted a loan, they would not consider a credit union," he said. "So the corollary should hold: When a small business wants a loan, it should knock on the door of a smaller lender such as a credit union."

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-- Alana Semuels

Photo: A Bank of America sign in Virginia. Credit: Alex E. Proimos via Flickr

More big bank customers jumping to credit unions, reports say

Bankofamerica
Even as big banks begin to back off proposed fees, disgruntled consumers may be jumping ship to credit unions, according to new reports this week.

The Credit Union National Assn. said that about 650,000 customers have opened new accounts at credit unions last month –- more than the 600,000 total who joined in 2010. That equates to $4.5 billion in new savings accounts over about four weeks.

The trade group attributed much of the growth to customer flight from institutions such as Bank of America Corp., which announced a new $5 debit-card fee in late September only to claw back the plan this week after heavy consumer backlash.

A poll Thursday from research firm Harris Interactive found that Bank of America customers are more likely to abandon the company than patrons of other banks and credit unions.

Nine percent of consumers using Bank of America said they were “not at all likely” to continue, compared with 6% of Wells Fargo & Co. users, 3% of JPMorgan Chase & Co. users and 2% of credit union users.

Fifteen percent of Bank of America customers said they don’t feel valued by the bank, compared with just 0.5% of credit union customers. Three quarters of credit union users said they had a “trustworthy relationship” with their institution, compared with a quarter of Bank of America customers.

But customers should be careful about bank-hopping, said Carol Kaplan, a spokeswoman with the American Bankers Assn. Other institutions, including credit unions, could also raise their fees or change their policies in the future, she said.

“Just as your cable or phone company has many different plans to choose from, your bank may have a new product that better meets your needs,” she said.

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Senators want banks to simplify checking account fee disclosures

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Photo: Tim Boyle / Getty Images

Senators want banks to simplify checking account fee disclosures

Sen. Dick Durbin (D-Ill.)

Emboldened by Bank of America's decision to abandon a proposed $5 monthly debit card fee, two senators on Thursday asked regulators to require banks to provide customers with a simple, one-page form listing all their checking account fees.

The goal is to give consumers a standardized, easy-to-understand disclosure form to make it easier to  compare fees charged by banks.

"When consumers are informed and can make choices, that's when the free market is at its best and strongest," said Sen. Dick Durbin (D-Ill.), who was joined by Sen. Jack Reed (D-R.I.) at a Capitol Hill news conference.

The two want banks to voluntarily adopt such a disclosure. But they also wrote to Raj Date, the acting head of the new Consumer Financial Protection Bureau, requesting that the agency act quickly to require banks and credit unions to post such a disclosure form on their websites.

Durbin and Reed touted a one-page disclosure form proposed by the Pew Charitable Trust. The form lists all basic checking account terms and conditions, including interest rate, ATM fees, overdraft penalties and account closing fees.

Susan Weinstock, director of the project, said the form was developed after analyzing 250 types of checking accounts last year.

"A hundred and eleven pages -- that's the median length of disclosure documents from the 10 largest banks in the United States," she said at the news conference. "These documents are not user-friendly, with highly technical and dense text."

Pew tested its form with consumers in Los Angeles, Philadelphia and Minneapolis. Two of the nation's three largest credit unions -- the Pentagon Federal Credit Union and the North Carolina State Employees' Credit Union -- have agreed to use the form to post fees on their websites, she said.

Continue reading »

Bank of America abandons plan to charge $5 debit card fee

BofAheadquartersDavisTurnerGettyImages
Bowing to a national flood of protests, Bank of America Corp. is calling off its plan to charge customers $5 a month for using its debit cards to make purchases -- a strategy that proved a public relations disaster for what once was America's biggest bank.

Analysts had believed the rest of the banking industry would follow BofA in imposing similar fees to make up for new rules restricting the fees banks charge merchants for accepting debit cards.

But instead, the Charlotte, N.C., banking giant finds itself following the lead of a host of rivals who decided last week not to incur the wrath of the American public with debit-card fees.

Bank of America lost its No. 1 ranking in asset size to JPMorgan Chase & Co. at the end of September, though it still has the most total deposits. It announced its decision on the debit fee Tuesday morning in a two-paragraph statement citing "customer concerns and the changing competitive marketplace."

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, BofA's co-chief operating officer, said in the statement.

“Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

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BofA backpedals on $5 debit fee

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-- E. Scott Reckard


Photo: Bank of America headquarters in Charlotte, N.C. Credit: Getty Images / Davis Turner 

BofA backpedals on $5 debit fee

BofA Sign-RTS-Lucas Jackson
Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

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Chase opts out of debit-card fee

Citibank is next with a new banking fee

Survey: Debit card users may switch banks over fee

--E. Scott Reckard

Photo credit: Lucas Jackson / Reuters

Chase opts out of debit-card fee

DebitswipeSeattle2009APElaineThompson

This post has been corrected. See below for details.

Another bank seems to have figured out what Bank of America Corp. has found out: charging for use of debit cards could chase customers away.

JPMorgan Chase & Co., which for eight months has been dinging its Georgia and northern Wisconsin customers $3 a month for using debit cards, said Friday it has decided to end the test next month and won't impose the fee anywhere.

There was no official announcement, but a person who had been briefed on the matter said the bank's customers preferred a program it calls Chase Total Checking.

That's a package that charges checking customers $12 a month ($10 monthly in California, Oregon and Washington) but waives the fee if they have at least $500 direct-deposited each month, or keep at least $1,500 in the account, or have a total of $5,000 in linked Chase accounts.

A host of critics including President Obama have attacked BofA's plan to start charging account holders $5 a month if they use their debit cards to make purchases (ATM transactions are free).

Citibank has said its customers really hate the idea of debit card fees. It has raised its fee for a basic checking account but has said it won't impose a debit fee.

US Bank also has said it has no plans for such a fee, although Wells Fargo has begun conducting its own tests of a $3 monthly charge and some regional banks like SunTrust, a big presence in the Southeast, have started charging a fee similar to BofA's.

Bank customers across the country have expressed "outrage" over the BofA fee, according to Norma Garcia, who heads up a financial-services program for Consumers Union, the advocacy arm of Consumer Reports.

"It's time for Bank of America to listen to its customers who are saying loud and clear: drop the fee or we'll drop you," Garcia said in a statement. "All banks that are considering debit card fees should ditch those plans."

BofA Chief Executive Brian T. Moynihan said this week that he’s “incensed” by public criticism of his company and is pushing back by reminding local leaders of its contributions to their economies.

[For the Record, 1:44 p.m. Oct. 28: An earlier version of this post indicated that Citibank had tested debit card fees. Citibank did not impose a debit card fee on a test basis, but it surveyed its customers, who opposed the idea of fees.]

RELATED:

Citibank imposes higher checking charges -- but no debit card fee

Debit cards poised to get much costlier

Survey: Debit cards users may switch banks over new fees     

--E. Scott Reckard

Photo credit:  Elaine Thompson / Associated Press

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