BofA discriminated against disabled borrowers: agency

Mon Feb 27, 2012 3:05pm EST

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(Reuters) - The Department of Housing and Urban Development said on Monday it is charging Bank of America Corp with discriminating against homebuyers with disabilities.

HUD alleged the second-largest U.S. bank by assets imposed "unnecessary and burdensome requirements" on borrowers who relied on disability income to qualify for their mortgages. The charge, now being handled by the Justice Department, is based on complaints by two borrowers in the state of Michigan and one in Wisconsin.

Bank of America in a statement said the three cases involved inconsistencies between Federal Housing Administration and conventional underwriting standards. The bank said it followed the stricter FHA standards and in all three cases funded the loans.

"There is no basis to allege that Bank of America has engaged in a systemic practice of discriminating on the basis of disability in connection with mortgage lending," the bank said.

The Fair Housing Act makes it illegal to discriminate against borrowers based on a disability, including requiring different application or qualification guidelines. It is also illegal to ask about the severity of a disability except in limited circumstances, which HUD said were not applicable in the three cases.

HUD alleged that Bank of America asked some borrowers for proof of their disabilities and requested information about their Social Security income before approving the loans, which were initially denied.

The charge is the latest mortgage-related setback for the Charlotte, North Carolina-based bank, which was one of five large lenders to reach a $25 billion settlement this month with federal officials and state attorneys general over foreclosure-related abuses. Bank of America has been particularly besieged by losses and lawsuits tied to its 2008 purchase of lender Countrywide Financial.

(Reporting By Rick Rothacker; Editing by Tim Dobbyn)

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