Page 185 - Bank Case Studies

Critical Acquisitions

Countrywide Financial was

the largest U.S. mortgage
lender controlling 20–25% of

the home loan market in
2008, compared with BofA’s

roughly 8 percent, but it had

become notorious for

pushing borrowers into predatory loans and as a result had

grown weaker from the large number of those loans

defaulting.

BofA had announced in January 2008, its intent to acquire

Countrywide Financial for $4.1 billion but in March 2008, it

was reported that the Federal Bureau of Investigation (FBI)

was investigating Countrywide for possible fraud relating to

home loans and mortgages. The acquisition was finally

completed in July 2008.

However, in 2011 BofA had to settle a Justice Department

complaint alleging racial discrimination of African-American

and Hispanic in mortgage lending by its Countrywide
subsidiary.

BofA’s Countrywide subsidiary was accused of:

• Charging higher rates and fees on mortgages to

minorities than to whites with similar characteristics

• Shifting minorities into subprime mortgages with

exploitative terms