Countrywide discrimination settlement reached
When the housing bubble burst, many Americans with subprime mortgages lost their homes. Now, Countrywide Financial has reached a settlement in which they were accused of discrimination practices in giving out such mortgages.
Jeremy Hobson: Now to the $335 million that Bank of America has agreed to pay to settle allegations involving racial discrimination at Countrywide -- that was the giant mortgage lender that BofA bought in 2008. And it's been accused of steering more than 200,000 black and hispanic borrowers into high cost subprime loans.
For more, let's bring in Harvard housing economist Nicolas Retsinas. Good morning.
Nicolas Retsinas: Good morning.
Hobson: Countrywide is not the only lender that's been accused of using racial discrimination when handing out mortgages -- how widespread was this?
Retsinas: I think, sadly, it probably was pretty widespread. You have to remember at the time of the bubble, there was desperation on the part of borrowers; there was push marketing on the part of lenders. And that's a recipe that unfortunately can lead to the kind of discrimination that the suit yesterday talked about.
Hobson: How could this have happened on such a large scale? Weren't there regulators watching this?
Retsinas: Well, I think in the first decade of the 21st century there was an ideology that said that the market would be the best way to allocate credit; the market would be the best way to allocate resources.
So yes, regulators were looking at this issues, but they weren't looking at it in a way that was trying to intervene with the government -- they were trying to stay out of the way. And sometimes, the best argument for a regulated market is an unregulated market. And I think in large measure, that's what we saw.
Hobson: Do you think this kind of thing has come to a halt now?
Retsinas: In large measure, I'd like to say we have no vestiges of discrimination left -- I think that would be by far an overstatement. But we have much different standards today, much different regulation, much tigheter credit screens. And I think because of that, you're not likely to see the kind of widespread discrimination that this story talks about.
Hobson: Nicolas Retsinas, a housing economist at Harvard. Thanks so much for talking with us.
Retsinas: Thank you.