Countrywide sued for racial bias in mortgage loans

By Jonathan Stempel

NEW YORK (Reuters) - Four black homeowners sued Countrywide Financial Corp. CFC.N on Thursday, accusing the largest U.S. mortgage lender of racial discrimination in its lending practices.

In a lawsuit seeking class-action status, the Massachusetts homeowners accused Countrywide and several affiliates of marking up interest rates or tacking on fees after agreeing to lend based on objective criteria such as credit histories or home values.

Such actions, the plaintiffs alleged, have in practice subjected black applicants to "a significantly higher likelihood of exposure to discretionary points, fees and interest mark-ups." This violates the federal Fair Housing Act and Equal Credit Opportunity Act, according to the complaint.

Countrywide, which makes roughly one in six U.S. home loans, said in a statement that it has not reviewed the lawsuits, and does not tolerate discriminatory lending.

The lawsuit is the second in as many days to accuse Calabasas, California-based Countrywide of bias often known as "predatory lending." On Wednesday, the National Association for the Advancement of Colored People accused Countrywide and 13 other lenders of steering blacks into higher-cost "subprime" loans, while offering white borrowers better terms.

"This is different from much of the subprime litigation," said Robert Rothman, a partner at Lerach Coughlin Stoia Geller Rudman & Robbins LLP, one of the plaintiffs' lawyers. "We are alleging that Countrywide had a discretionary pricing system that allowed it to add surcharges of points, fees and additional interest to what would otherwise be charged."

Rothman said "tens of thousands" of borrowers might be covered in the Massachusetts case.

Thursday's lawsuit was filed with the U.S. District Court in Massachusetts. The NAACP sued in the federal court in Los Angeles, and is also seeking class-action status.

Countrywide makes roughly one in six U.S. home loans. The company did not immediately return calls seeking comment.

Predatory lending is often used to describe charging high rates or fees to borrowers who may not be able to afford them.

The Massachusetts plaintiffs want Countrywide to halt any racially discriminatory lending practices, reimburse unfair charges and pay punitive damages, among other remedies.

Countrywide shares closed up 51 cents, or 1.4 percent, at $36.68 on the New York Stock Exchange on Thursday. They have fallen 13 percent this year.

(Additional reporting by Christian Plumb and Walden Siew)