\ ....~...-. :

f-··... t",..... F_'_~. .)

ERIC H. HOLDER, JR. 1 Attogl~Y General

I ..... I l"l~JI; t.JL-f_".' t?.

• \\ 'I I I
1-1; I I :

THOMAS E. PEREZ 2 Assistant Attorney General

CLEHIt: U. s. c:~; .Ri :: Tee UIi T
CO-ITflt,l. DIST OF CHIF.

Civil Rights Division

lOS j\~iG::Lh

3 STEVEN H. ROSENBAUM

5 Y _ _.____•__ .•_._. _ _...._,

Chief

4 DONNA M. MURPHY

Pri~~al Deputy Chief

5 PA CIAL. O'BEIRNE

E-mail: Patricia.O.Beirne~usdoj .gov
6 BURTIS M. DOUGHER

E-mail: Burtis.M.Dou~eiP'@usdoj .gov

7 DANIEL p. MOS'I'ELE

E-mail: Daniel.MosteUer@usdoj.gov

8 Trial Attorneys

Housing and Civil Enforcement Section

9 Civil RIghts Division

U.S. Department of Justice

10 950 Pennsylvania Avenue, N.W. - G Street

Washington, DC 20530

11 Tel: (202) 514-4713

Fax: (201) 514-1116

12
ANDRE BIROTTE JR.

13 United States Attorney_

LEON W. WEIDMAN

14 Chi~~ Sivil Division

SE~TSNEED

15 Assistant United States Attorney

Calif. BarNo. 217193

16 E-mail: Sekret.Sneed@usd~.gov

Federal Building, Suite 751

17 300 North Los Angeles Street

Los Angele~ CA 90012

18 Tel: (213) 8,4-3551

Fax: (213) 894-7819

19 Attorneys for Plaintiff

United States of America

20

UNITED STATES DISTRICT COURT

21

CENTRAL DISTRICT OF CALIFORNIA

22 UNITED STATES OF AMERICA,

23

Plaintiff,

24

v.

25 COUNTRYWIDE FINANCIAL
26 HCOORMPEOLROAATNIOSN, i'NCcO;UCNOTURNYTWRYIDWEIDE
BANK, 27
Defendants. 28

r' ~yll
CIVIL .:

1054

0-f
C'

G
~

COMPLAINT

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14 15 16 17 18 19 20 21
22 3.
23 24 25 26
27 4.
28

Plaintiff, United States of America, alleges:
INTRODUCTION The United States brings this action against Countrywide Financial Corporation, acting through its various divisions and subsidiaries (collectively, "Countrywide") for discriminating against more than 200,000 Hispanic and African-American borrowers in its residential mortgage lending. The action to enforce the Fair Housing Act, 42 U.S.C. §§ 3601-3619 ("FHA"), and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f("ECOA"), is brought to redress the discrimination based on race and national origin that Countrywide engaged in from 2004 to 2008 during the mortgage boom. Countrywide was one of the largest single-family mortgage lenders in the United States, if not the largest, between 2004 and 2008. During that period, Countrywide originated over 4.4 million residential mortgage loans through its retail loan offices and its wholesale division using mortgage brokers. Between 2004 and 2007, the total annual volume of these loans ranged between $110 billion and $243 billion. During that four-year period, Countrywide reported total net earnings of approximately $6.7 billion. Part of Countrywide's business strategy was to target local Hispanic and African-American markets in order to expand its lending and ultimately gain market dominance in making residential loans in those communities. As a result of Countrywide's policies and practices, more than 200,000 Hispanic and African-American borrowers paid Countrywide higher loan fees and costs for their home mortgages than non-Hispanic White borrowers, not based on their creditworthiness or other objective criteria related to borrower risk, but because of their race or national origin. Additionally, as a result of Countrywide's policies and practices, Hispanic and African-American borrowers were placed into subprime loans when similarly-

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qualified non-Hispanic White borrowers received prime loans. Between 2004 and 2007, more than 10,000 Hispanic and African-American wholesale borrowers received subprime loans, with adverse terms and conditions such as high interest rates, excessive fees, prepayment penalties, and unavoidable future payment hikes, rather than prime loans from Countrywide, not based on their creditworthiness or other objective criteria related to borrower risk, but because of their race or national origin. The victims of Countrywide's discrimination were located in more than 180 geographic markets across at least 41 states and the District of Columbia. For example, the statistical analyses discussed below found high numbers of potential victims in metropolitan markets throughout the country. The top twenty markets with the highest number of victims are: Los Angeles; Riverside; Chicago; Houston; Miami; Atlanta; New York; Washington, DC; Phoenix; San Diego; Las Vegas; Fort Lauderdale; Orlando; Santa Ana; Dallas; Denver; Oxnard; Newark; Long Island; and Detroit. More than two-thirds of the victims of Countrywide'S discrimination are Hispanic, and nearly one-third of all Countrywide's discrimination victims were located in California. Countrywide's home mortgage lending policies allowed its employees and mortgage brokers both to set the loan prices charged to borrowers and to place borrowers into loan products in ways that were not connected to a borrower's creditworthiness or other objective criteria related to borrower risk. Countrywide's policies created financial incentives for its employees and mortgage brokers by sharing increased revenues with them. Countrywide knew or had reason to know based on its own internal monitoring and reporting that its policies of giving unguided discretion to its own loan officers as well as to brokers was resulting in discrimination. Countrywide did not act to adequately compensate borrowers who were victims of discrimination nor did it

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11
12
13
14 15 16 17 9. 18 19 20 21 10. 22 23 24 11. 25 26 27 28

take effective action to change the discriminatory policies or practices to eliminate the discrimination. The higher borrowing costs Countrywide charged to hundreds of thousands of Hispanic and African-American families - whether paid as higher up-front fees, higher interest rates, prepayment penalties, or otherwise - put increased economic burdens on those families. For the Hispanic and African-American families Countrywide placed in subprime loans when those same families could have received prime loans, the economic burdens and risks, including the increased risk of delinquency or foreclosure, were particularly high. A recent survey of large national lenders by the Office of the Comptroller of the Currency reported that as of June 30, 2011, 28.1 % of subprime loans nationwide are seriously delinquent or in foreclosure compared to only 5.5% of prime loans. Similarly, as of the second quarter of 20 11, Bank of America reported that of the residential loans it services, approximately 74% of which were originated by Countrywide, about 33% of its subprime loans were seriously delinquent or in foreclosure compared to about 10% of its prime loans. In addition, Countrywide engaged in discrimination on the basis of marital status by encouraging married borrowers applying for credit in one spouse's name to have their non-applicant spouses give up all their rights and interests in the property securing the loan at the time the loans were originated. The United States brings this lawsuit to hold Countrywide accountable for its serious violations of law and remedy the substantial and widespread harmful consequences of Countrywide's discriminatory lending policies and practices. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1345,42 U.S.C. § 3614, and 15 U.S.C. § 1691e(h). Venue is appropriate pursuant to 28 U.S.C. § 1391(b) and (c).

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2 2.
3 4 5 6 7
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9 10 11 12 13 14. 14 15 16 17 18 19
20 5.
21 22 23 24 25 26 27 28

PARTIES During the period of time relevant to the events at issue in this Complaint through July 1, 2008, Defendant Countrywide Financial Corporation ("CFC") was a Delaware-incorporated financial holding company or savings and loan holding company with its principal business office in Calabasas, California. CFC created, authorized, and/or ratified the lending-related policies and practices at issue in this Complaint that its divisions and subsidiaries implemented. On July 1,2008, Bank ofAmerica Corporation ("BAC"), a Delaware-incorporated financial holding company, acquired ownership ofCFC, including all of its subsidiary business entities. Since that acquisition, CFC has remained a Delaware-incorporated company with its principal business office in Calabasas, California, as a direct, wholly-owned subsidiary of BAC. Defendant Countrywide Home Loans, Inc. ("CHL") is a New York-incorporated wholly-owned subsidiary of CFC with its principal business office in Calabasas, California. Prior to 2008, CHL funded the majority ofCFC's nationwide residential mortgage loan origination activity. For the loans it funded under the Countrywide name, CHL was the named lender on the promissory notes for those loans. CHL became a wholly-owned indirect subsidiary ofBAC on or about July 1, 2008, as a result of BAC's acquisition of CFC. Countrywide Bank ("CWB") was originally chartered as a national bank subject to supervision by the Office ofthe Comptroller of the Currency, and was a subsidiary of financial holding company CFC. CWB was headquartered in Alexandria, Virginia, until February, 2009. As a financial holding company, CFC, together with its subsidiary CHL, was supervised by the Board of Governors of the Federal Reserve System. On or about March 12, 2007, CWB changed its charter to that of a federal savings association, and CFC became a savings and loan holding company. Those changes caused CWB, CFC, and CHL to become subject to supervision by the Office ofThrift Supervision.

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3 4 5 6 7 8 9
10 7. 11 12
13
14 15 18. 16 17 18 19 20 21 22 19. 23 24 25 26 27 28

During 2006, CFC began the process of transitioning the funding of its residential loan originations from Clll- to CWB. For those loans funded through CWB under the Countrywide name, CWB was the named lender on the promissory notes for those loans. As of January 1,2008, CWB funded substantially all nationwide residential loan origination activity using the Countrywide name. For those loans funded by either Clll- or CWB, CFC used the same loan origination policies and procedures that it had created, authorized, or ratified, and the same employees and mortgage brokers. Throughout this Complaint, CFC, CWB, and Clll- are referred to collectively as "Countrywide." Even after BAC's purchase ofCFC on July 1,2008, CWB continued its banking and mortgage lending operations as a direct subsidiary of CFC, using the same loan origination policies and procedures, until approximately November 7,2008. At that time, BAC engaged in a series of corporate transactions that ended CWB's status as a subsidiary of CFC and made CWB a direct subsidiary of BAC. On April 23, 2009, the Office of the Comptroller of the Currency approved CWB's request to convert its charter back to that ofa national bank and the request by Bank of America, N.A. to then immediately acquire CWB by merger. These transactions were executed on April 27, 2009, as a result of which CWB ceased to exist. Bank of America, N.A. was the surviving institution resulting from this merger. Thus, Bank of America, N.A. is the successor in interest to CWB. The Defendants in this action are, or were at all relevant times, subject to Federal laws governing fair lending, including the FHA and the ECOA and the regulations promulgated under each of those laws. The FHA prohibits financial institutions from discriminating on the basis of, inter alia, race, color, or national origin in their residential real estate-related lending transactions. The ECOA prohibits financial institutions from discriminating on the basis of, inter alia, race, color,

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4 5 6 7 8 1. 9
10 11
12
13
14 2.
15 16 17 18 19
20 3.
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27 4.
28

national origin, or marital status with respect to any aspect of a credit transaction in carrying out their lending activities. The Defendants in this action are or were creditors within the meaning of the ECOA, 15 U.S.C. § 1691a(e), and are or were businesses that engage in residential real estate-related transactions within the meaning of the FHA, 42 U.S.C. § 3605.
REFERRALS FROM BANK REGULATORY AGENCIES In2006, Federal Reserve System Examiners initiated a fair lending review of CIa's mortgage pricing practices. As a result of that review, the Federal Reserve Board ("FRB") determined that it had "reason to believe that Countrywide Home Loans engaged in a pattern or practice of discrimination based on race and ethnicity in violation of Section 701(a) of the Equal Credit Opportunity Act and the Fair Housing Act." Following its determination described in Paragraph 21, and pursuant to 15 U.S.C. § 1691e(g), the FRB referred the matter to the Department of Justice on March 5, 2007. Through a series of tolling agreements, Countrywide "agree[d] to a suspension of the running of any applicable statute of limitations for any cause of action that could be brought against Countrywide pursuant to that referral from the Federal Reserve Board" from March 22,2007, through December 22, 2011. In early 2008, the Office ofThrift Supervision ("OTS") conducted an examination of the operations of Countrywide, including its compliance with applicable fair lending laws and regulations. As a result of that examination, the OTS determined that it had "a 'reason to believe' that Countrywide has displayed a 'pattern or practice' of discriminating against minority loan applicants in the pricing of home loans and against married couples concerning the terms and condition of home loans." Following its determination described in Paragraph 23, and pursuant to 15 U.S.C. § 1691e(g), the OTS referred the matter to the Department of Justice on June 27,

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2008. Through a series of tolling agreements, Countrywide "agree[d] to a suspension of the running of any applicable statute of limitations under the ECOA for any cause of action that could be brought against Countrywide pursuant to that referral from the Office of Thrift Supervision" from July 1,2009, through December 22, 2011. Based on the Federal Reserve and OTS referrals, the Department of Justice has engaged since 2007 in an investigation of Countrywide's lending policies, practices, and procedures, including reviewing internal company documents and non-public loan-level data on more than 2.5 million Countrywide loans originated between 2004 and 2008.
FACTUAL ALLEGATIONS Between January 2004 and December 2008, Countrywide originated residential loans nationwide through both a retail channel and a wholesale channel. Between 2004 and 2008, Countrywide's retail and wholesale divisions operated in virtually all geographical markets in the United States, including several hundred metropolitan areas ("MSAs") as well as the less-populated areas of each state outside of MSAs. Between at least January 2004 and August 2007, Countrywide originated virtually every type of loan product that was available in the residential lending market, several hundred products in all. These products included: (a) traditional prime loans; (b) subprime loans, typically designed for borrowers with credit scores or other credit characteristics deemed too weak to qualify for prime loans; and (c) "AIt-A" loans, those with application requirements or payment terms less restrictive than traditional prime loan terms or requirements, such as interest-only or negative amortization terms, reduced documentation requirements, or balloon payments. Subsequent to origination, Countrywide sold or securitized for sale the bulk of the loans it originated in the secondary market, either to govemment-

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10
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13
14 15 9. 16 17 18 19 20 21 22 23 24 25 26 27 28

sponsored entities Fannie Mae and Freddie Mac or to private investors. Changes in the loan securitization market in 2007 caused Countrywide to focus almost exclusively on prime loans after August 2007 and continuing into 2008. For the purposes of this Complaint, the term "subprime loans" includes any residential loan product that Countrywide originated and internally designated as subprime by including the label "B/C" in the product name. For the purposes of this Complaint, the term "non-subprime loans" includes any residential loan product that Countrywide originated and did not internally designate as subprime. For the purposes ofthis Complaint, the term "prime loans" includes any "non-subprime loans" that Countrywide originated that (a) required each monthly payment to include interest and a fully amortizing amount of principal and (b) did not categorically allow for reduced documentation of borrowers' income and assets in the underwriting process.
Retail Lending Pricing Between 2004 and 2008, Countrywide charged more than 100.,000 Hispanic and African-American borrowers higher fees and costs than non-Hispanic White retail borrowers not based on their creditworthiness or other objective criteria related to borrower risk, but because of their race or national origin. It was Countrywide's business practice to allow its employees who originated loans through its retail channel to vary a loan's interest rate and other fees from the price initially set based on a borrower's objective credit-related factors. This subjective and unguided pricing discretion resulted in Hispanic and African-American borrowers paying more not based on borrower risk than non-Hispanic White borrowers both on a nationwide basis and in dozens of geographic markets across the country where Countrywide originated a large volume of loans. As a result of Countrywide's discriminatory retail pricing practices, an Hispanic or AfricanAmerican borrower paid, on average, hundreds of dollars more for a Countrywide loan.

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Countrywide's retail pricing monitoring efforts, while inadequate to remedy discriminatory practices against African-American borrowers through 2007 and against Hispanics through 2008, were sufficient to put it on notice of widespread pricing disparities based on race and national origin. Even when Countrywide had reason to know there were disparities, however, Countrywide did not act to determine the full scope of these retail pricing disparities, nor did it take prompt and effective action to eliminate those disparities. Between at least January 2004 and December 2008, Countrywide had a policy or practice of periodically monitoring the pricing of retail home mortgage loans for disparities based on race or national origin at both the branch office and geographic market level. All of Countrywide's monitoring for disparities occurred subsequent to the loan origination, and Countrywide did not reimburse any retail borrowers who were found to have been charged higher loan prices until 2007, when it was required by its regulator to provide some restitution payments. Even then, Countrywide made only a small number of restitution payments. Countrywide's retail channel consis·ted of two primary divisions. The larger, the Consumer Markets Division ("CMD"), originated Countrywide's non-subprime residential loan products. From 2004 through 2007, CMD had branches in 48 states and the District of Columbia, with the number of branches ranging between 577 and 773, along with 4 to 5 call centers. These CMD branches and call centers originated loans to borrowers from across the United States. Countrywide employed retail loan officers and other employees at each CMD branch and call center to solicit applications for and originate residential loans to individual loan applicants. Beginning prior to January 2004 and continuing at least until December 2008, Countrywide utilized a two-tier decision-making process to set the interest rates and other terms and conditions of retail loans it originated. The first step involved setting the credit risk-based prices on a daily basis for Countrywide's various

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home mortgage loan products, including interest rates, loan origination fees, and discount points. In this step, Countrywide accounted for numerous objective credit-related characteristics of applicants by setting a variety of prices for each of the different loan products that reflected its assessment of individual applicant creditworthiness, as well as the current market rate of interest and the price it could obtain from the sale of such a loan to investors. These prices, referred to as par or base prices, were communicated through rate sheets, which were available electronically to its retail mortgage loan officers and other retail lending employees. Individual loan applicants did not have access to these rate sheets. As the second step in determining the final price it would charge an applicant for a loan, Countrywide allowed its retail mortgage loan officers, and other employees who participated in the loan origination process, to increase the loan price charged to borrowers over the rate sheet prices set by Countrywide, up to certain caps; this pricing increase was labeled an overage. Countrywide also allowed these same employees to decrease the loan price charged to borrowers below the stated rate sheet prices; this pricing decrease was labeled a shortage. Countrywide further allowed those employees to alter the standard fees it charged in connection with processing a loan application and the standard allocation of closing costs between Countrywide and the borrower. Employees made these pricing adjustments in a subjective manner, unrelated to factors associated with an individual applicant's credit risk. Countrywide provided no written guidance to its retail loan officers or other employees about the criteria they should consider in adjusting risk-based prices during the time period at issue. It did not establish an operational system for the documentation and supervisory review of their adjustments prior to loan origination. During the time period at issue, Countrywide loan officer compensation was affected by the loan officers' decisions with respect to pricing overages and shortages, as well as other factors, such as volume of loans originated. Loan

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officers could obtain increased compensation for overages and could have their total compensation potentially decreased for shortages. Countrywide's compensation policy thus provided an incentive for its loan officers in making pricing adjustments to maximize overages and, when offering shortages, to minimize their amount. Countrywide regularly calculated a Net Pricing Exception ("NPE") for each retail loan it funded, subsequent to origination. The NPE approximates the amount, positive or negative, by which the total cost of a loan to a borrower differs from the total cost of that loan had it closed at the rate sheet price, with the borrower's payment of standard fees and with the standard allocation of closing costs between the borrower and Countrywide. A positive NPE was an overage, and a negative NPE was a shortage. Charging overages raised the total cost of loans to borrowers above what they would have paid if the loans had closed based on the rate sheet risk-based price and with the payment of standard fees and the standard allocation of closing costs. Charging shortages lowered the total cost of loans to borrowers below what they would have paid if the loans had closed based on the rate sheet risk-based price and with payment of standard fees and the standard allocation of closing costs. Closing a loan with a shortage did not mean that Countrywide or the loan officer lost money on the transaction, only that they earned less profit than they would have absent the shortage. During the time period at issue, Countrywide established par prices for its loan products that were often above competitors' prices for those loan products for borrowers with specified credit qualifications. The majority of Countrywide'S retail borrowers received shortages between 2004 and 2008; as a result, when calculated for all borrowers, the average NPE charged each year during that period was negative. By regularly setting par prices above competitors' prices, Countrywide further encouraged the exercise of subjective pricing adjustments by its loan officers and other employees.

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7. For each residential loan that Countrywide retail mortgage loan officers

2

originated, information about each borrower's race and national origin and the

3

amount of overage or shortage paid was available to, and was known by,

4

Countrywide. Countrywide was required to collect, maintain, and report data with

5

respect to certain loan terms and borrower information for residential loans,

6

including the race and national origin of each retail home loan borrower, pursuant

7

to the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. § 2803.

8 8. Statistical analyses of data kept by Countrywide on retail loans originated by

9

Countrywide's CMD between January 2004 and December 2008 demonstrate

10

statistically significant) discriminatory pricing disparities in retail loans based on

11

both race (African-American) and national origin (Hispanic). These disparities

12

existed both at the national level and in numerous geographic markets across the

13

country.

14 9. Measured on a nationwide basis by NPE, in each year between 2004 and 2008,

15

Countrywide charged Hispanic borrowers whom Countrywide determined had the

16

credit characteristics to qualify for a home mortgage loan more in pricing

17

adjustments not based on borrower risk for retail CMD loans than non-Hispanic

18

White borrowers. The annual NPE disparities ranged between approximately 15

19

and 28 basis points, and they are statistically significant. 2 During this period,

20

Countrywide's CMD originated more than 210,000 retail loans to Hispanic

21

borrowers.

22

23 I Statistical significance is a measure of probability that an observed outcome would
24 not have occurred by chance. As used in this Complaint, an outcome is statistically 25 significant if the probability that it could have occurred by chance is less than 5%.

26 2 A basis point is a percentage of the total amount of a loan, with one hundred basis 27 points equaling one percent of the loan amount.

28

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Measured on a nationwide basis by NPE, in each year between 2004 and 2007, Countrywide charged African-American borrowers whom Countrywide determined had the credit characteristics to qualify for a home mortgage loan more in pricing adjustmen~s not based on borrower risk for retail CMD loans than nonHispanic White borrowers. The annual NPE disparities ranged between approximately 13 and 24 basis points, and they are statistically significant. During this period, Countrywide's CMD originated more than 90,000 retail loans to African-American borrowers. In approximately 54% of its high loan-volume markets in 2004 (79 of 147), defined for purposes of this paragraph as those MSAs and non-MSA areas in each state where CMD made more than 300 total loans and 30 or more loans to Hispanic borrowers in a given year, Countrywide charged Hispanic borrowers more in pricing adjustments not based on borrower risk for retail CMD loans, as measured by NPE, than non-Hispanic White borrowers by a statistically significantly amount. In. 2005, approximately 56% of such markets (81 of 145); in 2006,50% of such markets (70 of 140); in 2007, 40% of such markets (60 of 150); and in 2008, approximately 33% of such markets (41 of 126) showed statistically significant NPE disparities disfavoring Hispanic retail borrowers. The disparities in pricing adjustments not based on borrower risk resulted in Hispanic borrowers in these markets paying between approximately 6 and 107 basis points more than non-Hispanic White borrowers for retail CMD loans in a given year. Between 2004 and 2008, the number of these markets in which Countrywide charged nonHispanic White borrowers statistically significantly higher NPEs for retail CMD

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loans than Hispanic borrowers in a given year ranged only between 1 and 3, or 1%

2

to 2% of the high loan-volume markets. 3

3 2. In approximately 61 % of its high loan-volume markets in 2004 (78 of 128),

4

defined for purposes of this paragraph as those MSAs and non-MSA areas in each

5

state where CMD made more than 300 total loans and 30 or more loans to

6

African-American borrowers in a given year, Countrywide charged African-

7

American borrowers more in pricing adjustments not based on borrower risk for

8

retail CMD loans, as measured by NPE, than non-Hispanic White borrowers by a

9

statistically significantly amount. In 2005, approximately 65% of such markets

10

(74 of 114); in 2006, approximately 60% of such markets (68 of 114); and in

11

2007, approximately 32% of such markets (42 of 133) showed statistically

12

significant NPE disparities disfavoring African-American retail borrowers. The

13

disparities in pricing adjustments not based on borrower risk resulted in African-

14

American borrowers in these markets paying between approximately 8 and 71

15

basis points more than non-Hispanic White borrowers for retail CMD loans in a

16

given year. In all four years, there were no high loan-volume markets in which

17

Countrywide charged non-Hispanic White borrowers statistically significantly

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higher NPEs for retail CMD loans than African-American borrowers in a given

19

year.

20 3. These NPE disparities mean, for example, that Countrywide in 2007 charged a

21

retail CMD customer in Chicago borrowing $200,000 an average of about $795

22

more in pricing adjustments not based on borrower risk if he were Hispanic, and

23

24

25

3 The inclusion throughout this Complaint of statistical analyses for high-volume markets is intended only to provide examples of Countrywide's violation oflending

26 discrimination laws. The United States' allegations that Countrywide violated lending

27 discrimination laws are not limited to these high-volume markets.

28

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an average of about $460 more ifhe were African-American, than the average

2

amount charged to a non-Hispanic White borrower. In 2007, Countrywide

3

charged Hispanic and African-American retail CMD customers in Los Angeles

4

borrowing $200,000 approximately $545 and $415, respectively, higher than the

5

average amount Countrywide charged in pricing adjustments not based on

6

borrower risk to a non-Hispanic White borrower.

7 4. ' In setting the terms and conditions for its retail loans, including interest rates,

8

Countrywide accounted for individual borrowers' differences in credit risk

9

characteristics by setting the prices shown on its rate sheets for each loan product

10

that include its assessment of applicant creditworthiness as explained in Paragraph

11

32. Countrywide's loan officers' deviations from the rate sheet prices, as

12

measured by NPE, were separate from and not controlled by the credit risk

13

adjustments already reflected in the rate sheet prices. Accordingly, the race and

14

national origin NPE disparities described in Paragraphs 39-42 are -not adjusted for

15

borrowers' credit risk characteristics.

16 5. No Countrywide policy directed its retail lending employees to consider a

17

borrower's credit risk characteristics for a second time, after they had already been

18

considered in setting the par price, in determining a pricing overage or shortage on

19

a loan. Nevertheless, statistical regression analyses of the Countrywide NPEs that

20

control for credit risk factors such as credit score, loan amount, loan-to-value ratio,

21

debt-to-income ratio, and others, demonstrate a similar pattern of race and national

22

origin pricing disparities, with the magnitude only somewhat diminished from the

23

disparities described in Paragraphs 39-42. Thus, accounting for borrower credit

24

risk factors a second time does not explain the race and national origin disparities,

25

even if those factors were relevant to the SUbjective pricing adjustments measured

26

byNPE.

27 6. The statistically significant race and national origin-based disparities in NPEs

28

described in Paragraphs 39-42 for Hispanic and African-American borrowers who

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Countrywide determined had the credit characteristics to qualify for a home mortgage loan resulted from the implementation and interaction of Countrywide's policies and practices that: (a) routinely allowed or encouraged the use of subjective and unguided pricing adjustments not based on borrower risk by its own employees in setting pricing overages and shortages after par rates had been established by reference to credit risk and loan characteristics and then including those overages and shortages in the terms and conditions of loans Countrywide originated; (b) did not require its employees to justify or document the reasons for pricing adjustments not based on borrower risk; (c) failed to adequately monitor for and fully remedy the effects of racial and national origin disparities in those pricing adjustments; and (d) linked loan officer compensation in part to the charging of overages and shortages. NPE specifically measures the pricing variation caused by the subjective and unguided pricing adjustments not based on borrower risk. Countrywide continued to use this non-risk-based component of its overall retail loan pricing policy, to inadequately document and review the implementation of that pricing component, and to link loan officer compensation to overages and shortages through at least the end of 2008. Countrywide's policies and practices identified in Paragraph 46 were not justified by business necessity or legitimate business interests. There were less discriminatory alternatives available to Countrywide than these policies or practices. Countrywide had knowledge that the unguided and subjective discretion it granted to loan officers and other CMD employees in its retail loan pricing policies and practices was being exercised in a manner that discriminated against Hispanic and African-American borrowers, but continued to implement its policies and practices with that knowledge. Countrywide did not take effective action to change the pricing adjustment policies and practices to eliminate fully their discriminatory impact, nor did it change its compensation policy to discourage the charging of

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overages or shortages. It did not act to identify or compensate any individual borrowers who were victims of its discriminatory retail loan pricing policies and practices until it was required to do so by its regulator in 2007, and then it only identified or compensated a small portion of the victims.
Wholesale Lending Mortgage Broker Fees Between 2004 and 2008, Countrywide charged more than 100,000 Hispanic and African-American wholesale borrowers higher fees and costs than non-Hispanic White wholesale borrowers not based on their creditworthiness or other objective criteria related to borrower risk, but because oftheir race or national origin. It was Countrywide's business practice to allow its mortgage brokers who generated loan applications through its wholesale channel to vary a loan's interest rate and other fees from the price set based on a borrower's objective credit-related factors. This subjective and unguided pricing discretion resulted in Hispanic and AfricanAmerican borrowers paying more not based on borrower risk than non-Hispanic White borrowers both on a nationwide basis and in dozens of geographic markets across the country where Countrywide originated a large volume of loans. As a result of Countrywide's discriminatory practices, an Hispanic or AfricanAmerican borrower paid, on average, hundreds of dollars more for a Countrywide loan. Countrywide's wholesale pricing monitoring efforts, while inadequate to remedy discriminatory practices against Hispanic and African-American borrowers through 2008, were sufficient to put it on notice of widespread pricing disparities based on race and national origin. Even when Countrywide had reason to know there were disparities, however, Countrywide did not act to determine the full scope of these wholesale pricing disparities, nor did it take prompt and effective action to eliminate those disparities. Between at least January 2004 and December 2008, Countrywide had a policy or practice of periodically monitoring in a limited manner the pricing of wholesale home mortgage loans for discrimination based on

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2
3
4 5 6 7 8 9
10
11 12 13 1. 14 15 16 17 18 19
20 2.
21 22 23 24 25 26 27 28

race or national origin at the geographic market level and for some individual brokers. However, Countrywide's monitoring for racial and national origin disparities in its wholesale loans was inadequate. For example, the monitoring only occurred long after loan origination; at the individual broker level, it was limited to those brokers with very large pricing disparities that operated only in geographic markets that were first determined to have large pricing disparities; and the monitoring ignored aggregate broker pricing disparities. In addition, when Countrywide found wholesale borrowers who had been discriminatorily charged higher loan prices, Countrywide did not reimburse any of those borrowers for its discriminatory acts until 2008, when it was required by its regulator to provide some restitution payments. Even then, Countrywide made only a small number of restitution payments. Prior to January 2004 and continuing at least until December 2008, Countrywide originated and funded residential loans of all types, including both subprime and non-subprime loans, through its Wholesale Lending Division ("WLD"). Applications for these loans were brought to Countrywide during those years by mortgage brokers throughout the United States who had entered into contracts with Countrywide for the purpose of bringing loan applications to it for origination and funding. Countrywide's relationship with the mortgage brokers who brought loans to it was governed throughout the time period at issue by its standard Wholesale Broker Agreement ("WBA"). The WBA, while revised from time to time, consistently contained extensive provisions (a) mandating that a broker act in compliance with all Countrywide policies, (b) requiring submission to Countrywide of the full details of all compensation a broker received for each Countrywide loan, (c) specifying that the decision whether to fund a loan application was Countrywide's alone, and (d) permitting Countrywide to obtain any information with respect to a broker's business operations.

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2 3 4 5 6 7 8 9 10 4.
11
12
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14 15 16 17 18 19 20 21 22 23
24 5.
25 26 27 28

Countrywide was directly and extensively involved in setting the complete, final terms and conditions of wholesale loan applications generated by mortgage brokers that Countrywide approved and originated. Countrywide employed wholesale account executives who worked with mortgage brokers in submitting loan applications to Countrywide, and it employed underwriters to determine whether and on what terms to approve and fund wholesale loan applications. At the time of originating each loan, Countrywide was fully informed of those terms and conditions, including the fees it passed along to brokers, and it incorporated those terms and conditions into the wholesale loans it originated. Prior to January 2004 and until December 2008, Countrywide set terms and conditions, including interest rates, on a daily basis for its various home mortgage loan products available through its wholesale loan channel. Countrywide accounted for numerous applicant credit risk characteristics by setting a range of prices for each of the different loan products it offered that reflected applicant creditworthiness. It communicated these loan product prices to its brokers through rate sheets updated daily. Countrywide gave brokers who signed its standard WBA access to a non-public website where they could obtain the applicable terms and conditions for its various loan products, including rate sheets. Mortgage loan brokers who were part of Countrywide's network used these rate sheets to assist them in determining the interest rate, points, and fees they would include on completed individual residential loan applications they submitted to Countrywide for approval, origination, and funding. Individual loan applicants did not have access to these rate sheets. Under its WBA, Countrywide authorized brokers to inform prospective borrowers of the terms and conditions under which a Countrywide residential loan product was available. Countrywide did not require the mortgage brokers to inform a prospective borrower of all available loan products for which he or she qualified, of the lowest interest rates and fees for a specific loan product, or of specific loan

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5 6.
6 7 8
9
10 11 12
13
14 15 16 17 7. 18
19
20
21 8.
22 23 24 25 26 27 28

products best designed to serve the interests expressed by the applicant. The brokers were also responsible for preparing each loan application and supporting documentation on form documents provided by Countrywide, in accordance with Countrywide's policies and procedures in effect at the time. Upon receipt of a completed loan application from a broker, Countrywide evaluated the proposed loan using Countrywide's underwriting guidelines and determined whether to originate and fund the loan. The WBA provided that "Countrywide shall have no obligation to fund any Loan submitted to it by Broker and may reject any Loan that, in Countrywide's sole discretion, does not meet the applicable underwriting guidelines." In the event that Countrywide rejected a loan application or proposed a counteroffer, the WBA provided that Countrywide would prepare the notice of adverse action that ECOA requires the creditor to prepare. The WBA also provided for each loan approved by Countrywide for funding to be closed in the name of Countrywide, in accordance with Countrywide's written closing instructions, and on closing documents prepared by Countrywide. Between 2004 and 2008, Countrywide operated between 39 and 52 WLD branch offices and several regional centers, and employed wholesale account executives to work with mortgage brokers in originating loans, which included assisting the brokers in setting the terms and conditions of loan applications and approvals. Mortgage brokers who supplied Countrywide with loan applications that Countrywide funded were compensated in two ways. One was through a yield spread premium ("YSP"), an amount paid by Countrywide to the brokers based on the extent to which the interest rate charged on a loan exceeded the base, or par, rate for that loan to a borrower with particular credit risk characteristics fixed by Countrywide and listed on its rate sheets. The YSP is derived from the present dollar value of the difference between the credit risk-determined par interest rate a wholesale lender such as Countrywide would have accepted on a particular loan

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12 13 14 15 16 17 18 19 20 21 22 23
24 O.
25 26 27 28

and the interest rate a mortgage broker actually obtained for Countrywide. Countrywide benefitted financially from the loans it made at interest rates above the par rates set by its rate sheets. For those loans that it sold or securitized, higher interest rates meant sales at prices higher than it otherwise would have obtained; for loans it retained, higher interest rates meant more interest income over time for it. The second way brokers were compensated was through direct fees. Countrywide directed its closing agents to pay these direct fees to brokers out of borrowers' funds at the loan closing. Taken together, these two forms of compensation are referred to in this Complaint as "total broker fees." During the time period at issue, Countrywide was fully informed of all broker fees to be charged with respect to each individual residential loan application presented to it. The WBA required the broker to inform an applicant, inter alia, of all fees and charges included with the application, including YSP and direct fees. The WBA further required the broker to submit an application package to Countrywide that included, inter alia, a good-faith estimate of "all amounts Broker will charge Applicant or earn in connection with the loan, including any applicable yield spread premium." Countrywide then included those fees in the calculations it made to prepare various closing documents, including the HUD-I Form, an itemized statement of receipts and expenditures in connection with a residential loan closing, and the Truth in Lending Act Disclosure Statement. Countrywide also included these fees in its instructions on how to distribute funds at closing. Total broker fees raised the annual percentage rate ("APR") charged on a loan, and could increase the note interest rate and the total amount borrowed. Between at least January 2004 and December 2008, Countrywide'S policies and practices established a two..step process for the pricing of wholesale loans that it originated similar to that used in its retail division, as described in Paragraph 32. The first step was to establish a base or par rate for a particular type of loan for an applicant with specified credit risk characteristics. In this step, Countrywide

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11 2.
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14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

accounted for numerous objective credit-related characteristics of applicants by setting a variety of prices for each of the different loan products that reflected its assessment of individual applicant creditworthiness, as well as the current market rate of interest and the price it could obtain for the sale of such a loan from investors. These prices were communicated through the rate sheets described in Paragraph 54. Countrywide's second step of pricing wholesale loans permitted mortgage brokers to exercise subjective, unguided discretion in setting the amount of total broker
fees charged to individual borrowers, unrelated to aD. applicant's credit risk
characteristics. Countrywide had written policies placing a ceiling on total broker fees that changed several times during the 2004-2008 time period. For most of2004, Countrywide capped total broker compensation for prime loans at 5% of the loan amount or $3000 and for subprime loans at 6% of the loan amount or $3500. In December 2004, Cou.ntrywide eliminated the dollar limitations and, through July 2007, followed a policy that instead capped total broker fees at 5% of the total loan amount for prime loans and at 6% of the loan amount for what it described as core subprime loans. On a $200,000 loan, for example, these percentage caps allowed brokers to receive up to $10,000 in total broker fees for a prime loan, and $12,000 in total fees for a subprime loan. Other than these caps, Countrywide did not establish any objective criteria, or provide guidelines, instructions, or procedures to be followed by brokers (a) in setting the amount of direct fees they should charge or (b) in determining to charge an interest rate for a loan above that set by its rate sheet, which in turn determined the amount of YSP Countrywide would pay the broker. Mortgage brokers exercised this fee pricing discretion Countrywide gave them, untethered to any objective credit characteristics, on every loan they brought to Countrywide for origination and funding. Countrywide affirmed or ratified these discretionary fee pricing decisions for all the brokered

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loans it originated and funded. Each year during this time period when Countrywide had in place higher fee caps for subprime than prime loans, Countrywide's mortgage brokers charged higher average total fees for subprime loan applications than for non-subprime loan applications, measured on a nationwide basis. For each residential loan application obtained by mortgage brokers and subsequently funded by Countrywide, information about each borrower's race and national origin and the amount and types of broker fees paid was available to, and was known by, Countrywide. Countrywide was required to collect, maintain, and report data with respect to certain loan terms and borrower information for residential loans, including the race and national origin of each wholesale residential loan borrower, pursuant to HMDA, 12 U.S.C. § 2803. Statistical analyses of data kept by Countrywide on wholesale loans originated by Countrywide between January 2004 and December 2008 demonstrate statistically significant discriminatory pricing disparities in both subprime and non-subprime wholesale loans based on both race (African-American) and national origin (Hispanic). These disparities existed both at the national level and in numerous geographic markets across the country. Measured on a nationwide basis in each year between 2004 and 2008, Countrywide charged Hispanic borrowers whom Countrywide determined had the credit characteristics to qualify for a home mortgage loan more in total broker fees for non-subprime wholesale loans than non-Hispanic White borrowers. The annual total broker fee disparities ranged between approximately 31 and 47 basis points, and they are statistically significant. During this period, Countrywide originated more than 160,000 "non-subprime wholesale loans to Hispanic borrowers. Measured on a nationwide basis in each "year between 2004 and 2008, Countrywide charged African-American borrowers whom Countrywide

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..

1

determined had the credit characteristics to qualify for a home mortgage loan more

2

in total broker fees for non-subprime wholesale loans than non-Hispanic White

3

borrowers. The annual total broker fee disparities ranged between approximately

4

59 and 67 basis points, and they are statistically significant. During this period,

5

Countrywide originated more than 65,000 non-subprime wholesale loans to

6

African-American borrowers.

7 7. Measured on a nationwide basis in each year between 2004 and 2007,

8

Countrywide charged Hispanic borrowers whom Countrywide determined had the

9

credit characteristics to qualify for a home mortgage loan more in total broker fees

10

for subprime wholesale loans than non-Hispanic White borrowers. The annual

11

total broker fee disparities ranged between approximately 12 and 19 basis points,

12

and they are statistically significant.4 During this period, Countrywide originated

13

more than 55,000 subprime wholesale loans to Hispanic borrowers.

14 8. Measured on a nationwide basis in each year between 2004 and 2007,

15

Countrywide charged African-American borrowers whom Countrywide

16

determined had the credit characteristics to qualify for a home mortgage loan more

17

in total broker fees for subprime wholesale loans than non-Hispanic White

18

borrowers. The annual total broker fee disparities ranged between approximately

19

36 and 49 basis points, and they are statistically significant. During this period,

20

Countrywide originated more than 35,000 subprime wholesale loans to African-

21

American borrowers.

22

23

24 25 4 Due to the major changes in the housing market that began in the latter part of
2007, Countrywide made too few subprime wholesale loans in 2008 to permit statistical 26 analysis of 2008 wholesale broker fees similar to that described in Paragraphs 67-68 for 27 2004-2007.

28

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14 15 16 17 18
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20 21 22 23 24 25 26 27 28

In approximately 76% of its high non-subprime loan-volume markets in 2004 (81 of 106), defined for purposes ofthis paragraph as those MSAs and non-MSA areas in each state where Countrywide made more than 300 total non-subprime wholesale loans and 30 or more such loans to Hispanic borrowers in a given year, Countrywide charged Hispanic borrowers more in total broker fees not based on borrower risk for wholesale non-subprime loans than non-Hispanic White borrowers by a statistically significant amount. In 2005, approximately 83% of such markets (94 of 113); in 2006, approximately 77% of such markets (91 of 118); in 2007, approximately 82% of such markets (87 of 106); and in 2008, approximately 97% of such markets (33 of 34) showed statistically significant total broker fee disparities disfavoring Hispanic non-subprime wholesale borrowers. The disparities in total broker fees not based on borrower risk resulted in Hispanic borrowers in these markets paying between approximately 18 and 134 basis points more than non-Hispanic White borrowers for non-subprime wholesale loans in a given year. In all five years, there were no high loan-volume markets in which Countrywide charged non-Hispanic White borrowers statistically significantly higher total broker fees for non-subprime wholesale loans than Hispanic borrowers in a given year. In approximately 91 % of its high non-subprime loan-volume markets in 2004 (71 of78), defined for purposes of this paragraph as those MSAs and non-MSA areas in each state where Countrywide made more than 300 total non-subprime wholesale loans and 30 or more such loans to African-American borrowers in a given year, Countrywide charged African-American borrowers more in total broker fees not based on borrower risk for wholesale non-subprime loans than non-Hispanic White borrowers by a statistically significant amount. In 2005, approximately 85% of such markets (74 of 87); in 2006, approximately 84% of such markets (77 of 92); in 2007, approximately 87% of such markets (78 of 90); and in 2008, 90% of such markets (36 of 40) showed statistically significant total

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10
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14 15 16 17 18 19 20 21 22 23 24 25
26 2.
27 28

broker fee disparities disfavoring African-American non-subprime wholesale borrowers. The disparities in total broker fees not based on borrower risk resulted in African-American borrowers in these markets paying between approximately 21 and 147 basis points more than non-Hispanic White borrowers for nonsubprime wholesale loans in a given year. In all five years, there were no high loan-volume markets in which Countrywide charged non-Hispanic White borrowers statistically significantly higher total broker fees for non-subprime wholesale loans than African-American borrowers in a given year. In approximately 84% ofits high subprime-Ioan-volume markets in 2004 (27 of 32), defined for purposes of this paragraph as those MSAs and non-MSA areas in each state where Countrywide made more than 300 total subprime wholesale loans and 30 or more such loans to Hispanic borrowers in a given year, Countrywide charged Hispanic borrowers more in total broker fees not based on borrower risk for wholesale subprime loans than non-Hispanic White borrowers by a statistically significant amount. In 2005, approximately 61 % of such markets (22 of 36); in 2006, approximately 49% of such markets in (17 of35); and in 2007,50% of such markets (7 of 14) showed statistically significant total broker fee disparities disfavoring Hispanic subprime wholesale borrowers. The disparities in total broker fees not based on borrower risk resulted in Hispanic borrowers in these markets paying between approximately 14 and 107 basis points more than nonHispanic White borrowers for subprime wholesale loans in a given year. From 2004-2006, there were no high subprime-Ioan-volume markets in which Countrywide charged non-Hispanic White borrowers statistically significantly higher total broker fees for subprime wholesale loans than Hispanic borrowers in a given year; in 2007, there was one such market. In approximately 74% of its high subprime-Ioan-volume markets in 2004 (23 of 31), defined for purposes ofthis paragraph as those MSAs and non-MSA areas in each state where Countrywide made more than 300 total subprime wholesale loans

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and 30 or more such loans to African-American borrowers in a given year, Countrywide charged African-American borrowers more in total broker fees not based on borrower risk for wholesale subprime loans than non-Hispanic White borrowers by a statistically significant amount. In 2005, approximately 74% of such markets (28 of 38); in 2006, approximately 68% of such markets (23 of 34); and in 2007, approximately 58% of such markets (II of 19) showed statistically significant total broker fee disparities disfavoring African-American subprime wholesale borrowers. The disparities in total broker fees not based on borrower risk resulted in African-American borrowers in these markets paying between approximately 20 and 103 basis points more than non-Hispanic White borrowers for subprime wholesale loans in a given year. In all four years, there were no high subprime-Ioan-volume markets in which Countrywide charged non-Hispanic White borrowers statistically significantly higher total broker fees for subprime wholesale loans than African-American borrowers in a given year. These disparities in total broker fees mean, for example, that Countrywide in 2007 charged a non-subprime ~holesale customer in Los Angeles borrowing $200,000 an average of about $970 more in total broker fees not based on borrower risk if she were Hispanic, and an average of about $1,195 more if she were AfricanAmerican, than the average amount charged to a non-Hispanic White nonsubprime wholesale customer. Comparable average disparities in 2007 for Hispanic and African-American non-subprime wholesale customers in Chicago borrowing $200,000 were approximately $1,100 and $1,235, respectively, higher than the average amount Countrywide charged a non-Hispanic White nonsubprime wholesale customer borrowing $200,000. Similarly, in 2006, Countrywide charged a subprime wholesale customer in Chicago borrowing $200,000 an average of about $590 more in total broker fees not based on borrower risk if she were Hispanic, and an average of about $740 more if she were African-American, than the average amount charged to a non-

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14 15 16 17 6. 18 19 20 21 22 23 24 25 26 27 28

Hispanic White subprime wholesale customer. Comparable average disparities in 2006 for Hispanic and African-American subprime wholesale customers in Los Angles borrowing $200,000 were approximately $440 and $560, respectively, higher than the average amount Countrywide charged a non-Hispanic White subprime wholesale customer borrowing $200,000. In setting the terms and conditions for its wholesale loans, including interest rates, Countrywide accounted for individual borrowers' differences in credit risk characteristics by setting the prices shown on its rate sheets for each loan product that include its assessment of applicant creditworthiness, as explained in Paragraph 60. Mortgage brokers' deviations from the rate sheet prices, as measured by total broker fees, were separate from and not controlled by the credit risk adjustments already reflected in the rate sheet prices. Countrywide reviewed these total broker fees and then charged them to borrowers in the loans it originated and funded. Accordingly, the race and national origin total broker fee disparities described in Paragraphs 65-72 are not adjusted for borrowers' credit risk characteristics. No Countrywide policy directed its mortgage brokers, or the Countrywide wholesale account executives who worked with them, to consider a borrower's credit risk characteristics for a second time in deviating from the interest rate fixed by its rate sheets for a specific loan product for a borrower with specified credit qualifications or in assessing direct fees. Nevertheless, statistical regression analyses of the Countrywide total broker fees that control for credit risk factors such as credit score, loan amount, loan-to-value ratio, debt-to-income ratio, and others, demonstrate a similar pattern of race and national origin pricing disparities, with the magnitude only somewhat diminished from the disparities described in Paragraphs 65-72. Thus, accounting for borrower credit risk factors a second time does not explain the race and national origin disparities, even if those factors were relevant to the total broker fees not based on borrower risk.

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The statistically significant race and national origin-based disparities in total broker fees described in Paragraphs 65-72 for Hispanics and African-Americans who Countrywide determined had the credit characteristics to qualify for a home mortgage loan resulted from the implementation and the interaction of Countrywide's policies and practices that: (a) included pricing terms based on the subjective and unguided discretion of brokers in setting total broker fees not based on borrower risk in the terms and conditions of loans Countrywide originated after par rates had been established by reference to credit risk characteristics; (b) did not require mortgage brokers to justify or document the reasons for the amount of total broker fees not based on borrower risk; (c) failed to adequately monitor for and fully remedy the effects of racial and ethnic disparities in those broker fees; and (d) created a financial incentive for brokers to charge interest rates above the par rates Countrywide had set. Total broker fees specifically measures the pricing variation caused by the subjective and unguided pricing adjustments not based on borrower risk. Countrywide continued to use these discretionary wholesale broker fee pricing policies, to inadequately document and review the implementation of that pricing component, and to incentivize upward broker adjustments to the par interest rate through the end of2008. Countrywide's policies and practices identified in Paragraph 77 were not justified by business necessity or legitimate business interests. There were less discriminatory alternatives available to Countrywide than these policies or practices. Countrywide had knowledge that the unguided and subjective discretion it granted to mortgage brokers in its wholesale pricing policies and practices was being exercised in a manner that discriminated against Hispanic and African-American borrowers, but continued to implement its policies and practices with that knowledge. For example, an internal January 2006 Countrywide fair lending report stated that "WLD believes the current approach/policy is responsible" but

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11 o.
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14 15 16 17 18 19 20 21 22 23 24 25 26 27 1. 28

immediately afterward stated that "WLD is not confident that [its] remediation activities will drive down disparity levels materially at the 'Top ofHouse'" (national level).. It did not take effective action to change the broker fee policies and practices to eliminate fully their discriminatory impact, nor did it substantially alter its broker compensation policies and practices. Countrywide did not act to identify or compensate any individual borrowers who were victims of its discriminatory wholesale pricing policies and practices until it was required to do so by its regulator in 2008, and it only identified or compensated a small number of the victims.
Wholesale Lending Product Placement Between 2004 and 2007, Countrywide placed more than 10,000 Hispanic and African-American wholesale borrowers into subprime loans even though nonHispanic White wholesale borrowers who had similar credit qualifications were placed into prime loans. As a result of being placed in a subprime loan, an Hispanic or African-American borrower paid, on average, thousands of dollars more for a Countrywide loan. It was Countrywide's business practice to allow its mortgage brokers and employees to place a wholesale loan applicant in a subprime loan even when the applicant qualified for a prime loan according to Countrywide's underwriting practices. Countrywide also gave mortgage brokers discretion to request exceptions to underwriting guidelines, and Countrywide's employees had discretion to grant these exceptions. These policies and practices resulted in the placement ofHispanic and African-American borrowers into subprime loans, when similarly-situated non-Hispanic Whit~ borrowers were placed into prime loans, both on a nationwide basis and in dozens of geographic markets across the country where Countrywide originated a large volume of wholesale loans. Countrywide's wholesale product placement monitoring efforts, while inadequate to remedy discriminatory practices against Hispanic and African-American

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borrowers through 2007, were sufficient to put it on notice of widespread product placement disparities based on race and national origin. Even when Countrywide had reason to know there were disparities, however, Countrywide did not act to determine the full scope of these wholesale product placement disparities, nor did it take prompt and effective action to eliminate those disparities. Between at least January 2004 and August 2007, Countrywide attempted to implement a system that would "flag" subprime loan applicants eligible to be "uplifted" to a nonsubprime loan product. This system flagged thousands of Hispanic and AfricanAmerican loans. However, this pre-origination "uplift" system only required that notification of potential uplift eligibility be given to brokers, and it neither required the brokers to inform applicants of this fact nor required the brokers to take any other specific action with respect to identified applicants. Moreover, this "uplift" system did not accurately correspond to Countrywide's actual underwriting practices for non-subprime loan products that treated published underwriting guidelines as merely advisory and widely granted exceptions. As a result, the system both failed to identify a large proportion of applicants who received a subprime loan whose qualifications were similar to those of applicants who received non-subprime loan products and resulted in few "flagged" applicants receiving a non-subprime loan. Between 2004 and 2007, Countrywide published underwriting guidelines that purported to establish the objective criteria an applicant had to meet in order to qualify for a particular type of loan product. These underwriting guidelines were available to mortgage brokers who had entered into contracts with Countrywide to enable them to select loan products for individual borrowers with differing creditrelated characteristics. They also could be used by the wholesale account executives, underwriters, and others employed by Countrywide to determine whether to originate the applications brought to it by mortgage brokers. These underwriting guidelines were intended to be used to determine whether a loan

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applicant qualified for a prime loan product, an Alt-A loan product, a subprime loan product, or for no Countrywide loan product at all. A prime loan product has loan terms and conditions, including prices, that generally are most favorable for a borrower, an Alt-A loan product is less favorable, and a subprime loan product is even less favorable and often included terms such as initial short-term teaser interest rates that suddenly rise to produce substantially increased and potentially unaffordable payments after two to three years, as well as substantial pre-payment penalties. Mortgage brokers had discretion to request that applications they submitted be treated as exceptions to Countrywide's underwriting guidelines. Loan underwriters or account executives employed by Countrywide, who determined whether to originate the applications brought to it by mortgage brokers, had the discretion to grant such exceptions. Between January 2004 and early 2007, Countrywide substantially increased the number of exceptions it granted to its loan underwriting guidelines. By early 2007, Countrywide originated as many as half of certain loan products as exceptions to its underwriting policies. As a result, Countrywide made tens of thousands of non-subprime loans to borrowers between 2004 and 2007 based on criteria other than strict adherence to its published underwriting guidelines. Countrywide did not grant these exceptions to Hispanic and African-American borrowers on a basis equal to that for non-Hispanic White borrowers. Countrywide provided no guidance to mortgage brokers about the factors to consider in asking for exceptions and provided only very general, broad guidance to its own employees about how to exercise discretion when granting exceptions. Individual loan applicants had no ability on their own to ask for an exception directly from Countrywide's loan underwriting employees. Between January 2004 and July 2007, Countrywide's cap on the amount of total compensation that a residential mortgage broker could receive on an individual loan varied, in part, based on whether the loan was a subprime product or a non-

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subprime product. As described in Paragraph 62, although Countrywide changed its broker compensation caps several times between December 2004 and July 2007, Countrywide's compensation policy allowed brokers to earn higher maximum total compensation for submitting subprime loans to Countrywide for origination than for non-subprime loans throughout this time period. Between 2004 and 2007, mortgage brokers who submitted loan applications funded by Countrywide received higher total broker fees for subprime loans than for non~subprime loans. From 2005-2007, the average subprime loan had total broker fees between approximately 26 and 53 basis points higher than the average non-subprime loan, measured annually on a nationwide basis. Countrywide's compensation policy and practice created a financial incentive for mortgage brokers to submit subprime loans to Countrywide for origination rather than any other type of residential loan product. Statistical analyses of loan data kept by Countrywide on wholesale 30-year term prime and subprime loans originated by Countrywide between January 2004 and August 2007 demonstrate that on a nationwide basis Hispanics who qualified for a Countrywide home mortgage loan and who obtained wholesale loans from Countrywide had odds between approximately 2.6 and 3.5 times higher than similarly-situated non-Hispanic White borrowers of receiving a subprime loan instead of a prime loan, after accounting for objective credit qualifications. Those odds ratios demonstrate a pattern of statistically significant differences between Hispanic and non-Hispanic White borrowers with respect to their placement by Countrywide in one of these two loan product categories even after controlling for objective credit qualifications such as credit score, loan amount, debt-to-income ratio, loan-to-value ratio, and others. These statistically significant disparities existed both at the national level and in numerous geographic markets across the country.

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In approximately 590/0 of its high loan-volume markets in 2004 (24 of 41), defined for purposes of this paragraph as those MSAs and non-MSA areas in each state where during the year Countrywide made at least 300 total wholesale loans, including at least 30 subprime loans to both non-Hispanic White and Hispanic wholesale borrowers, Hispanic borrowers had odds of receiving subprime loans that are statistically significantly higher than non-Hispanic White borrowers ("statistically significant odds ratio disparities"). In 2005, approximately 54% (22 of 41) of such markets; in 2006 approximately 77% (33 of 43) of such markets; and in 2007 approximately 58% (11 of 19) of such markets had statistically significant odds ratio disparities disfavoring Hispanic borrowers. In individual high-volume markets with statistically significant odds ratio disparities, the odds of Hispanic borrowers receiving a subprime loan ranged from approximately 1.3 to 11.6 times higher than similarly-situated non-Hispanic White borrowers in a given year. In only one such market, and for only one year from 2004-2007, was there a statistically significant odds ratio disparity favoring Hispanic borrowers. Statistical analyses of loan data kept by Countrywide on wholesale 30-year term prime and subprime loans originated by Countrywide between January 2004 and August 2007 demonstrate that on a nationwide basis African-Americans who qualified for a Countrywide home mortgage loan and who obtained wholesale loans from Countrywide had odds between approximately 2.1 and 2.7 times higher than similarly-situated non-Hispanic White borrowers of receiving a subprime loan instead of a prime loan after accounting for objective credit qualifications. Those odds ratios demonstrate a pattern of statistically significant differences between African-American and non-Hispanic White borrowers with respect to their placement by Countrywide in one of these two loan product categories even after controlling for objective credit qualifications such as credit score, loan amount, debt-to-income ratio, loan-to-value ratio, and others. These statistically

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19 o.
20 21 22 23 24 25 26 27 28

significant disparities existed both at the national level and in numerous geographic markets across the country. In approximately 51% of its high loan-volume markets in 2004 (24 of 47), defined for purposes of this paragraph as those MSAs and non-MSA areas in each state where during the year Countrywide made at least 300 total wholesale loans, including at least 30 subprime loans to both non-Hispanic White and AfricanAmerican wholesale borrowers, African-American borrowers had odds of receiving subprime loans that are statistically significantly higher than nonHispanic White borrowers. In 2005, approximately 52% (26 of 50) of such markets; in 2006, approximately 61 % (28 of 46) of such markets; and in 2007 approximately 71 % (20 of 28) of such markets had statistically significant odds ratio disparities disfavoring African-American borrowers. In individual high-loan volume markets with statistically significant odds ratio disparities, the odds of African-American borrowers receiving a subprime loan ranged from approximately 1.3 to 8.3 times higher than similarly-situated non-Hispanic White borrowers in a given year. In only one such market, and for only one year from 2004-2007, was there a statistically significant odds ratio disparity favoring African-American borrowers. These odds ratio disparities mean, for example, that Countrywide in 2006 placed more than 200 Hispanic and African-American wholesale borrowers in the Chicago market into subprime loans when non-Hispanic White wholesale borrowers in Chicago with similar credit risk characteristics received prime loans. Each of these Hispanic and African-American borrowers would have paid thousands of dollars in extra payments over the first four years of the loan's term because they were placed into a subprime loan rather than a prime loan, based on the average loan amount and the disparity between prime and subprime interest rates for borrowers with similar credit risk characteristics in the Chicago market in 2006. Similarly, Countrywide in 2006 placed more than 400 Hispanic and

- 36-

1 2 3 4 5 6 7 8 9 1. 10
11
12
13
14 15 16 17
18 2.
19 20 21 22 23 24 25 26 27 28

African-American wholesale borrowers in the Los Angeles market into subprime loans when non-Hispanic White wholesale borrowers in Los Angeles with similar credit risk characteristics received prime loans. Each of these Hispanic and African-American borrowers would have paid thousands of dollars in extra payments over the first four years of the loan's term because they were placed into a subprime loan rather than a prime loan, based on the average loan amount and the disparity between prime and subprime interest rates for borrowers with similar credit risk characteristics in the Los Angeles market in 2006. Analyses of loan data to determine the odds of borrowers receiving non-subprime loans (as defined in Paragraph 28) as opposed to subprime loans demonstrate similar disparities. Hispanic and African-American wholesale borrowers had statistically significantly higher odds of receiving subprime loans from Countrywide rather than non-subprime loans, as compared to similarly-situated non-Hispanic White wholesale borrowers after taking into account objective credit risk characteristics. These race- and national origin-based disparities persisted at both the nationwide level and in numerous high loan-volume MSAs during the same years, 2004-2007. The disparate placement of both Hispanic and African-American wholesale borrowers whom Countrywide determined had the credit characteristics to qualify for a home mortgage loan into subprime loan products, when compared to similarly-situated non-Hispanic White borrowers described in Paragraphs 86-89, resulted from the implementation and interaction of Countrywide's policies and practices that: (a) permitted mortgage brokers and Countrywide'S own employees to place an applicant in a subprime loan product even if the applicant could qualify for a prime loan product; (b) did not require mortgage brokers or its employees to justify or document the reasons for placing an applicant in a subprime loan product even if the applicant could qualify for a prime loan product; (c) did not require mortgage brokers to notify subprime loan applicants that they could

- 37-

1 2 3 4 5 6 7 8
9 3.
10
11
12 13 4. 14 15 16 17 18 19 20 21 22 23
24 5.
25 26 27 28

qualify for a prime loan product; (d) created a financial incentive for brokers to place loan applicants in subprime loan products; (e) allowed brokers and Countrywide loan officers and underwriters to request and to grant underwriting exceptions in a subjective, unguided manner; and (f) failed to monitor these discretionary practices to ensure that borrowers were being placed in loan products on a nondiscriminatory basis. Countrywide continued to use these product placement, compensation, and discretionary underwriting policies until it exited the subprime lending business after August 2007. Countrywide's policies or practices identified in Paragraph 92 were not justified by business necessity or legitimate business interests. There were less discriminatory alternatives available to Countrywide than these policies or practices. Countrywide had knowledge that its wholesale lending policies and practices identified in Paragraph 92 encouraged the placement of applicants in subprime rather than prime loan products and that its uplift system described in Paragraph 81 was ineffective, but continued to implement its policies and practices with that knowledge. For example, an internal Countrywide July 2007 report to its fair lending committee discussed "significant errors due to operational failures" in its uplift system. Countrywide did not take effective action to change the discriminatory policies or practices to eliminate their discriminatory impact. It did not act to identify or compensate any individual borrowers who were victims of its discriminatory product placement policies or practices.
Marital Status - Spousal Signature Policy A married individual applying for credit has the choice of whether to apply solely in his or her own name, rather than jointly with his or her spouse. In an application for a loan secured by real property by a married individual who decides to apply solely ~n his or her own name, the creditor will have a security interest in the entire property as long as the non-applicant spouse signs the legal

- 38-

1 2 3 4 5
6 6.
7 8 9 10
11
12 7.
13
14 15
16 8.
17 18 19 20 21 22 23 24 25 26 27 9. 28

document (such as a mortgage or a deed of trust, depending on the state) granting the lender the security interest. The non-applicant spouse need not become obligated to repay the loan from personal resources or to give up his or her ownership interest in the property in order to give the creditor a security interest in the entire property. Between 2004 and 2008, when a married individual decided to apply for a loan solely in his or her own name, Countrywide's spousal signature policies or practices encouraged its employees and agents to have the non-applicant spouse execute documents that transferred to the applicant spouse all rights and interests the non-applicant spouse had in the property securing the loan. Countrywide continued this spousal signature policy or practice at least through June 1, 2008. During the time period at issue, numerous non-borrower spouses executed quitclaim deeds or other similar documents transferring their legal rights and interests in jointly-held property to their borrower spouses as a condition of Countrywide originating a loan to those borrower spouses. Section 701 of the ECOA, 15 U.S.C. § 1691(a), makes it "unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction - (1) on the basis of ... marital status...." Regulation B, adopted pursuant to explicit congressional direction, 15 U.S.C. § 1691 b, provides that the term "applicant" includes guarantors, sureties, endorsers, and similar parties whose participation in the credit transaction is required in order to complete it. 12 C.F.R. § 202.2(e). The policy or practice of having a non-borrower spouse execute documents that transfer all legal rights and interests in jointly-held property as a condition of originating a loan to the borrower spouse makes the non-borrower spouse an applicant within the meaning of the ECOA, 15 U.S.C. § 1691a(b). The Official Staff Commentary to Regulation B ("OSC") is an official staff interpretation of Regulation B. The OSC states that "a creditor may require the

- 39-

1

applicant's spouse to sign the instruments necessary to create a valid security

2

interest in the property" and nothing more if that "is sufficient to make the

3

property available to satisfy the debt in the event of default." 12 C.F.R. Supp I §

4

202.7 ~7(d)(4)(2). The OSC further provides: "Generally, a signature to make the

5

secured property available will only be needed on a security agreement." Id.

6

Moreover, the OSC also states, in the context of unsecured credit: "A creditor may

7

not routinely require, however, that ajoint owner sign an instrument (such as a

8

quitclaim deed) that would result in the forfeiture of the joint owner's interest in

9

the property." 12 C.F.R. Supp. I § 202.7 ~7(d)(2){l)(ii). That principle applies

10

equally to applications for secured credit.

11 100. A non-applicant spouse who executes a quitclaim deed or similar transfer

12

document as a result of Countrywide's policy and practices, unless on a voluntary

13

and fully-infonned basis, risks substantial financial loss and uncertainty by

14

executing documents that transfer to the applicant spouse all rights and interests

15

the non-applicant spouse had in the property securing the loan.

16

17

FAIR HOUSING ACT and EQUAL CREDIT OPPORTUNITY ACT

18

VIOLATIONS

19 101. Countrywide's residential lending-related policies and practices and the policies

20

and practices it followed in residential credit transactions as alleged herein

21

constitute:

22

a. Discrimination on the basis of race and national origin in making available,

23

or in the tenns or conditions of, residential real estate-related transactions,

24

in violation of the FHA, 42 U.S.C. § 3605(a) (Complaint ~~ 29-94);

25

b. Discrimination on the basis of race and national origin in the tenns,

26

conditions, or privileges of sale of a dwelling, in violation of the FHA, 42

27

mr U.S.C. § 3604(b) (Complaint 29-94);

28

- 40-

1

c. Discrimination against applicants with respect to credit transactions on the

2

·basis of race and national origin, in violation ofECOA, 15 U.S.C.

3

§ 1691(a)(1) (Complaint ~ 29-94); and

4

d. Discrimination against applicants with respect to credit transactions on the

5

basis of marital status, in violation of ECOA, 15 U.S.C. § 1691(a)(1), and

6

Regulation B, 12 C.F.R. §§ 202.4(a) and 202.6(b)(8) (Complaint ~~ 95-

7

100).

8 02. Countrywide's residential lending-related policies and practices as alleged herein

9

constitute:

IO

a. A pattern or practice of resistance to the full enjoyment of rights granted by

11

the FHA, 42 U.S.C. §§ 3601-3619, and ECOA, 15 U.S.C. §§ 1691-1691f

12

(Complaint ~~ 29-100); and

13

b. A denial of rights granted by the FHA to groups of persons - both African-

14

Americans and Hispanics - that raises an issue of general public

15

importance (Complaint ~~ 29-94).

16 03. Between 2004 and 2008, more than 200,000 persons throughout the nation have

17

been victims of Countrywide's pattern or practice of discrimination and denial of

18

rights as alleged herein. In addition to higher direct economic costs, the victims of

19

discrimination suffered additional consequential economic damages resulting from

20

having an excessively costly loan, including possible prepayment penalties,

21

increased risk of credit problems, default, and foreclosure, and other damages,

22

including emotional distress. They are aggrieved persons as defined in the FHA,

23

42 U.S.C. § 3602(i), and aggrieved applicants as defined in the ECOA, 15 U.S.C.

24

§ 1691e, and have suffered injury and damages as a result of Defendants' conduct.

25

Attachment A depicts the states where these aggrieved persons described in

26

Paragraphs 41-42,69-72,87, and 89 were located when the discrimination

27

occurred.

28

- 41 -

1 104. Countrywide's policies and practices, as described herein, were intentional,

2

willful, or implemented with reckless disregard for the rights of Hispanic and

3

African-American borrowers and non-applicant spouses of married mortgage loan

4

applicants.

5

6

RELIEF REQUESTED

7

WHEREFORE, the United States prays that the Court enter an ORDER that:

8 1) Declares that the Defendants' challenged lending policies and practices constitute

9

violations of the Fair Housing Act, 42 U.S.C. §§ 3601-3619, and the Equal Credit

10

Opportunity Act, 15 U.S.C. §§ 1691-1691f;

11 2) Enjoins the Defendants, their agents, employees, and successors, and all other

12

persons in active concert or participation with any of the Defendants, from:

13

(a) Discriminating on the basis of race and national origin with respect

14

to making available, or in the terms or conditions of, a residential

15

real estate-related transaction; .

16

(b) Discriminating on the basis of race and national origin in the terms,

17

conditions, or privileges of sale of a dwelling;

18

(c) Discriminating on the basis of race, national origin, and marital

19

status against any person with respect to any aspect of a credit

20

transaction;

21

(d) Failing or refusing to take such affirmative steps as may be

22

necessary to restore, as nearly as practicable, the victims of the

23

Defendants' unlawful conduct to the position they would have been

24

in but for the discriminatory conduct; and

25

. (e) Failing or refusing to take such affirmative steps as may be

26

necessary to prevent the recurrence of any such discriminatory

27

conduct in the future; to eliminate, to the extent practicable, the

28

effects of the Defendants' unlawful practices; and to implement

- 42-

1 2 3 4 3) 5 6 7 8 4) 9 10 11 12
13
14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

policies and procedures to ensure that all ~orrowers have an equal opportunity to seek and obtain loans on a non-discriminatory basis and with non-discriminatory terms and conditions; Awards monetary damages to the victims of the Defendants' discriminatory policies and practices for the injuries caused by the Defendants, including direct economic costs, consequential economic damages, and other damages, pursuant to 42 U.S.C. § 3614(d)(I)(B) and 15 U.S.C. § 1691e(h); and Assesses a civil penalty against the Defendants in an amount authorized by 42 U.S.C. § 3614(d)(I)(C), in order to vindicate the public interest.

- 43 -

1

The United States further.prays for such additional relief as the interests ofjustice

2 may reqUIre.

3

ERIC H. HOLDER, JR.

4

Attorney General

5

Q- [-~

6

THOMAS E. PEREZ

7

Assistant Attorney General

Civil Rights Division

8 9 10

Am4~ ;STEVEN H. ROSENBA

11

Chief Housing and Civil Enforcement Section

12

13

14

SEWLg 15
16
17 Assistant United States Attorney
18 Email: Sekret.Sneed~usdoj.gov Federal BuildinlnSUI e 7516
19 300 North Los ~eles Street Los Angeles, CA 0012
20 Tel: (213) 894-3551 Fax: (213) 894- 7819
21

22

23

24

25

• i
, ~

26

27

28

DANIEL P. MOSTELLER
E-mail: Daniel.Mosteller@usdoj.gov Trial Attorneys Housing and Civil Enforcement Section Civil RIghts Division U.S. Department of Justice 950 Pennsylvania Avenue, N.W. - G St. Washington, D.C. 20530 Tel: (20'"2) 514-4713 Fax: (202) 514-1116

Attachment A

~

Jurisdictions With Substantial Concentrations of Aggrieved Persons /41 States and the District of Columbia)

Mli

NO

.#

•HI

Prepared by:
u.s.Department of Justice
Civil Rights Division
washington, D.C. 20530

 
 Case 2: 11'~CV-10540-PfGJ'JW Document 4 Filed 12/28/~1) Page 1 of 17 Page 10 #: 15

1

ERIC H. HOLDER, JR. 
 Attorney General 


THOMAS E. PEREZ

2 Assistant Attorney Genet:aJz Fivil Rights Division

3

STEVEN H. ROSENBAulvl Chief 


. 


DONNA M. MURPHY

4 Princj.Qal Deputy Chief 


PATRICIA L. O'BEIRNE . 


5 ~tTl¥ilKftBfj~~Wi~usdoj.gov 


6 5r~lliE~~leif1s1fE't:t~W@usdoj.gov 


7 E-mail: Daniel.Mosteller@usdoj.gov


Trial Attorneys .

. 


8 Housing and Civil Enforcement Section 


9

Civil RIghts Division
 U.S. Department of Justice

10 11

950 Pennsylvania Avenue, N.W. - G Street

TWeal:sh(2in0g2t)o5ni

DC 20530 4-4713

Fax: (201) 514-1116

12 ANDRE BIROTTE JR.

United States Attorney_


13 LEON W. WEIDMAN 


Ch!~&,9ivil Division 


14 SE~TT. SNEED

Assistant United States Attorney (SBN 217193)

15 E-mail: Sekret.Sneed usdo·. ov 


Federal Ul mg, Ulte 


16 300 North Los Angeles Street 


Los Angele~ California 90012 


17 Tel: (2r3) 8y4-S551


18 .

AFtaxt.;18.:L~(, 2e1y3s)fI8o9
r4P-l7a8in1t9iff

. 


19 ~r~D STATES OF AMERICA 


; ,,~;
20~'
21 .~

.:"'- C) _J
f~~~~
0;~

f I ~

UNITED STATES DISTRICT COURT 
 CENTRAL DISTRICT OF CALIFORNIA 


22~~ED TATES OF AMERICA,

~:"• I.; 7.} ch4'-J <J"

~'''''111

,.

Pl:',ntIff,

..'

~11 1054 01lLJ: 6~

COUNTRYWIDE FINANCIAL 25 CORPORATION' COUNTRYWIDE 

26 HOME LOANS, iNc; COUNTRYWIDE 

BANK, 27 -------D-ef~en~d~an~ts- . ---------~ 28

U t'" 


I

0540-P~G}JW Case 2:11-cv-1

Document 4 Filed 12/28111 ,)Page 2 of 17 Page 10 #: 16

1

I. INTRODUCTION

2

This Consent Order (Order) is submitted jointly by the parties for the approval of

. 3 ancfentiy by the Court simultaneously with the filing ofthe United States' Complaint in

4 this action. This Order resolves the claims of the United States that the Defendants have

5 engaged in a pattern or practice of conduct in violation ofthe Equal Credit Opportunity

6 Act (ECOA), 15 U.S.C. §§ 1691-1691f, and the Fair Housing Act (FHA), 42 U.S.C. §§

7 3601-3619, by discriminating on the basis of race, national origin, and marital status in

8 the extension of residential credit and in the making of residential real estate-related

9 transactions.

10

There has been no factual finding or adjudication with respect to any matter

11 alleged by the United States. The parties have entered into this Order to avoid the risks,

12 expense, and burdens of litigation and to resolve voluntarily the claims in the United

13 States' Complaint of the Defendants' alleged violations of federal fair lending laws.

14

II. BACKGROUND

15 ._ .J,3etween 2004 and 2008, Countrywide Financial Corporation ("CFC"), acting

16 through its various divisions and subsid·iaries (collectively, "Countrywide"), was one of

17 the largest single-family mortgage lenders in the United States. During that period,

18 Countrywide originated over 4.4 million residential mortgage loans through its retail

19 loan offices and its wholesale division using mortgage brokers.

20

In 2006, Federal Reserve System examiners initiated a fair lending review of

21 Countrywide Home Loans' mortgage pricing practices. As a result of that review, the

22 Federal Reserve Board ("FRB") determined that it had "reason to believe that

23 Countrywide Home Loans engaged in a pattern or practice of discrimination based on

24 race and ethnicity in violation of Section 701(a) of the Equal Credit Opportunity Act

25 and the Fair Housing Act." Following that determination, and pursuant to 15 U.S.C.

26 § 1691e(g), the FRB referred the matter to the Department of Justice. In early 2008, the

27

28

-2­

Case 2:11-CV-10540~P~G}JW Document 4 Filed 12/28/f1)Page 3 of 17 Page ID #:17

1 Office of Thrift Supervision ("OTS") conducted an examination ofthe operations of

2 Countrywide, including compliance by Countrywide Bank, l at that time a subsidiary of

3 CFC, with applicable fair lending laws and regulations, and determined that it had "a

4 'reason to believe' that Countrywide has displayed a, 'pattern or practice' of

5 discriminating against minority·loan applicants in the pricing of home loans and against

6 married couples concerning the terms and condition of home loans." Following its

7 determination, and pursuant to 15 U.S.C. § 1691e(g), the OTS referred the matter to the

8 Department of Justice.

9

In its Complaint, the United States alleges that between 2004 and 2008,

10 Countrywide's Consumer Markets Division and Wholesale Lending Division engaged

11 in a pattern or practice of discrimination on the basis of race and national origin in

12 violation of both the FHA and the ECOA based on the interest rates, fees, an·d costs paid

13 by African-American and Hispanic borrowers. For loans sourced through mortgage

14 brokers, the Complaint further alleges that Countrywide engaged in a pattern or practice

15 of discrimination because African-American and Hispanic borrowers were more than

.:1

16 twice as likely to be placed in subprime loans than non-Hispanic White wholesale

f

17 borrowers who had similar credit qualifications. The Complaint also alleges that, until J 18 at least June 1,2008, Countrywide engaged in discrimination on the basis of marital

1,9 status byfollowing policies and practices that had the effect of requiring married

20 borrowers applying for credit inone spouse's name having their non-applicant spouses

21 give up all their rights and interests in the property securing the loan at the time the

22 loans were originated. Under the ECOA, a creditor may only require the non-applicant

23 spouse to execute the document(s) necessary to create a valid security interest in the

j

, j

24

25

In a series of corporate transactions that occurred on April 27, 2009, Countrywide

26 Bank ("CWB") converted its charter to that ofa national bank; Bank of America, N.A. immediately acquired CWB by a merger; and CWB then ceased to exist. Thus, Bank of
27 America, N.A. is the successor in interest to CWB. 


28 


-3­

.',

'.

Case 2:11-CV-10540-PSG}\JW Document 4 Filed 12/28/1-1} Page 4 of 17 Page 10 #:18

"

1 property used to secure the loan; the creditor may not obligate the non-borrower spouse

2 to sign an instrument that transfers that spouse's rights or interest in the property.

3

The United States acknowledges that its claims against the Defendants relate

4 solely to loans originated by Countrywide and do not relate to any mortgage lending

5 practices of Bank of America Corporation ("BAC"). '

6

Defendants deny all the allegations and claims of a pattern or practice of

7 discrimination in violation of the FHA and the ECOA as set forth in the United States'

8 Complaint.

9

BAC has represented to the United States that BAC and its subsidiaries do not

10 originate and price loans employing policies and procedures that the United States

11 alleges resulted in the discriminatory practices at issue in its Complaint. BAC has

12 furt~er represented that it has furnished substantial support to non-profit community

13 organizations which provide education counseling and other assistance to low income

14 and minority borrowers in connection with obtaining credit, loan modifications and

15 other retention activities. This Consent Order does not contain any injunctive measures

16 against the current operations of BAC or any of its subsidiaries.

17

III. REMEDIAL ORDER

18 1.

Unless otherwise stated herein, the remedial provisions of this Order shall be

19 implemented not later than thirty (30) days after the effective date of this Order. The

20 effective date of this Order is the date upon which it is approved and entered by the

21 Court.

, 22 2.

Defendants represent that Countrywide Financial Corporation and Countrywide

23 Home Loans, Inc. (collectively, "Countrywide Defendants") no longer originate

24 residential loans. In the event that either Countrywide Defendant reenters the business

25 of originating residential loans, Defendants shall notify the United States at the earlier

26 of sixty (60) days before it intends to reenter this line of business or the time that they

27 notify their federal regulators of either Countrywide Defendant's intent to reenter this

28 line of business. Countrywide Defendants shall also implement policies, practices and

-4­

~~

,

Case 2:11-cv-10540-P$G";Y\JW Document 4 Filed 12/28/11 )Page 5 of 17 Page 10 #:19

1 monitoring designed to prevent and detect potential fair lending violations in their

2 origination of residential loans, and shall provide the United States with the details of

3 these policies, practices, and monitoring, forty-five (45) days prior to implementing

4 such reentry. The United States shall have thirty (30) days to review and agree or object

5 to the proposed policies. The parties shall utilize the dispute resolution procedures set

6 forth in Paragraph 24 to resolve any objections by the United States.

7 3.

In the event that either Countrywide Defendant reenters the business ()f

8 originating residential loans, it shall adopt policies and practices designed to ensure

9 compliance with ECOA's prohibition on marital status discrimination comparable to

10 those adopted by Countrywide on or about June 1, 2008. Countrywide Defendants shall

11 provide the United States with the details of these policies, practices, and monitoring,

12 forty-five (45) days prior to implementing such reentry. The United States shall have

13 thirty (30) days to review and agree or object to the proposed policies. The parties shall

,

1
{

14 utilize the dispute resolution procedures set forth in Paragraph 24 to resolve any

15 objections by the United States.

16 4.

Within thirty (30) days of the effective date of this Order, Defendants shall

17 cause to be deposited in an interest-bearing escrow account the total sum of three

.18 hundred and thirty-five million dollars ($335 million) to compensate allegedly

19 aggrieved persons for monetary and other damages they may have suffered as a result of

20 Defendants' alleged violations of the FHA and the ECOA ("Settlement Fund"). Title to

21 this account shall specify that it is "for the benefit of aggrieved persons pursuant to

22 Order of the Court in United States v. Countrywide Financial Corp., et al. filed on

23 December 21, 2011". Defendants shall provide written verification of the deposit to the

24 United States, along with the account number and identification of the depository

25

26 


27 


28 


-5­

Case 2: 11-cv-1 0540-P~G"JW Document 4 Filed 12/28/11 ') Page 6 of 17 Page ID #:20

1 institution) within five days of the depositing of the funds described above.2 Any

2 interest that accrues shall become part of the Settlement Fund and be utilized and

3 disposed of as set forth herein.

4 5.

The United States has requested from Defendants information and data it

5 reasonably believes will assist in identifying aggrieved persons and determining any

6 damages. Such information and, data shall be used by the United States only for the law

7 enforcement purposes of implementing this Order. Within ninety (90) days of the date

8 on which the United States provides an electronic file specifying the loans for which it

9 requests data, Defendants shall supply, to the extent that it is within their custody or

10 control, the requested information and data. To the extent that any requested

11 information and data is not within Defendants' custody or control, but such information

12 and data is held by a currently or formerly affiliated entity, they also shall make a good

13 faith effort to obtain such information and data from the entity or entities. If Defendants

14 acquire such information or data from such an entity or entities, they shall supply such

15 information and data within fifteen (15) days of receipt of such information or data.

16 6.

Within sixty (60) days of entry of this Order Defendants also shall enter into a

17 contract retaining a Settlement Administrator ("Administrator"), subject to approval by

18 the United States, to conduct the, activities set forth in the following paragraphs.

19 Defendants shall bear all costs and expenses of the Administrator, and Defendants'

20 contract with the Administrator shall require the Administrator comply with the

21

22

23
24 2 Any documents or information required by this Order to be submitted to the United States shall be sent by private (non-USPS) overnight delivery addressed as
25 follows: Chief, Housing and Civll Enforcement Section, Civil Rights Division, U.S. 26 Department of Justice, 1800 G Street, NW, Suite 7002, Washington, DC 20006, Attn.
DJ #188-12C-32. The parties may also agree to delivery electronically or by hand27 delivery to the above address by courier.
28

- 6­

Case 2:11-cv-10540-PSGj\JW Document 4 Filed 12/2811f) Page 7 of 17 Page 10 #:21

1 provisions of this Order as applicable to the Administrator.3 The Administrator's

2 contract shall require the Administrator to work cooperatively with the United States in

3 the conduct of its activities, including reporting regularly to and providing all .

4 reasonably requested information to the United States.. Defendants shall allow the

5 Administrator access to mortgage origination loan files, including non-electronic loan

6 file data and documents that are in the possession of Defendants or any entity owned,

7 directly or indirectly, by BAC, for the purposes of accomplishing the Administrator's

8 task set forth in Paragraph 12. The Administrator's contract shall require the

9 Administrator to comply with all confidentiality and privacy restrictions applicable ,to

10 the party who supplied the information and data to the Administrator.

i

i

11 7.

The United States shall identify aggrieved persons with respect to its race and

12 national origin discrimination claims within ninety (90) days of receipt of all the

13 information and data it requested. The United States shall provide a list of allegedly

.... .

'."\ ~

14 aggrieved persons to the Defendants and the Administrator.

15 8.

The Administrator's contract shall require the Administrator to make its best

16 efforts, using all reasonable methods, to locate each identified aggrieved person and

17 obtain such information as the United States reasonably considers necessary from each.

18 The Administrator's contract shall require the Administrator to complete this

19 responsibility within a period of six (6) months from the date the United States provides

20 the list described in Paragraph 7, subject to an extension of time as provided by

21 Paragraph 20. The Administrator's contract shall require the Administrator, as part of

22

23 3 In the event the United States has reason to believe that the Administrator is not 24 materially complying with the terms of its contract with Defendants, the United States
and Defendants shall meet and confer for the purpose of mutually agreeing upon a 25 course of action to effect the Administrator's material compliance with its contract with 26 Defendants. In the event that the United States and Defendants are unable to agree upon
a course of action to effect the Administrator's material compliance with its contract 27 with the Defendants, the parties shall present the matter to the Court.
28

-7­

Case 2:11-cv-10540-PfG)AJW Document 4 Filed 12/28/1'1) Page 8 of 17 Page ID #:22

1 its operation, to establish cost-free means for aggrieved persons to contact it, such as

2 email and a toll-free telephone number.

3 9.

TheUnited States shall specify the amount each allegedly aggrieved person

4' identified in Paragraph 8 and located by the Administrator shall receive from the

5 Settlement Fund no later than one-hundred-and-twenty (120) days after the deadline for

6 locating allegedly aggrieved persons has passed. The United States shall provide the

7 compensation list to the Administrator. This list shall direct no less than twenty million

8 dollars ($20 million) to allegedly aggrieved persons who lived in Illinois at the time of

9 origination to resolve Defendants' pending litigation with the State of Illinois, and the

10 Administrator's communications with such borrowers shall refer to both the settlement

11 of litigation by the United States and the State of Illinois.

12 10. The Administrator's contract shall require the Administrator to send releases,

13 with language approved by the United States, to aggrieved persons. After receipt of

14 executed releases, Defendants shaU.require the Administrator promptly to deliver

15 payments to those persons in amounts determined by the United States as described in

16 Paragraph 9. The Administrator's identification and payment responsibility may take

17 place on a rolling basis with approval from the United States.

18 11 ~, The United States also shall provide to the Administrator a list of loans
.'..... '~
19 between 2004 and 2008 for which it reasonably believes that there is the potential that a

20 non-borrowing spouse may be an aggrieved person with respect to the marital status

21 discrimination claims alleged in the, Complaint. The Administrator's contract shall

22 require the Administrator to send letters describing the marital status discrimination

23 alleged in the Complaint, the text for which is approved in advance by the United States,

24 to the borrowers on this list. The letter shall also specifically request that the

25 information regarding these claims be shared with the person who was their spouse at

26 the time of the loan, and further request that the spouse or former spouse contact the

27 Administrator if a quitclaim deed or other similar instrument was executed as part of the

28 loan origination or closing process.

-8­

'.,
Case 2:11-cv-10540-pfGfJW Oocu,ment 4 Filed 12/28/1"1) Page 9 of 17 Page 10 #:23
'.

1 12. The Administrator's contract shall require the Administrator to review the loan

2 files for those loans with respect to which a non-borrowing spouse contacts it pursuant

3 to Paragraph 11. The Administrator shall determine to the extent possible, based on its

--

4 review ofthe aforementioned loan files and, if necessary, an interview ofthe non­

5 borrowing spouse, whether a non-borrower spouse made a knowing and voluntary

6 decision.to execute a transfer of title or was presented with the opportunity to execute

7 instead only a security interest in the property in connection with the origination of the

8 loan. The Administrator shall report to the United States on the results of each such

9 review. The United States shall review the information from the Administrator and

10 provide to the Administrator a list of persons identified by the United States as

11 aggrieved by Countrywide's signature policies and practices for non-applicant spouses,

12 as well as a specified compensation amount for damages. In addition, Defendants and

13 the Administrator shall provide reasonable assistance to any non-borrowing spouse who

14 the United States has determined was aggrieved because he or she transferred his or her

15 property rights, in the execution and filing of instruments necessary to re-transfer to the

16 non-borrowing spouse his or her property interest, if he or she so chooses, the borrower

17 spouse agrees to such a transaction, and the property interest can still be recovered. In

18 addition, the Defendants shall pay the administrative costs required to effect,the re­

19 transfer of such property interests which, in no event, shall exceed $1,500.00, in cases

20 where the property interest still can be recovered.

21 13. The Administrator's' contract shall require the Administrator to set forth

22 reasonabl~ deadlines, subject to approval of the United States, so that the compensation

23 is distributed and checks are presented for payment or become void prior to the date that

24 is twenty-four (24) months from the date the initial notifications are sent.

25 14. Payments from the Settlement Fund to allegedly aggrieved persons shall be

26 subject to the following conditions, provided that the details in administration of the ,

27 Settlement Fund set forth in Paragraphs 5-13 can be modified by written agreement, of

28 the parties and without further Court approval:

-9­

Case 2: 11-cv-1 0540-PSG--"JW Document 4 Filed 12/28/11 )Page 10 of 17 Page ID #:24

1

(a) No allegedly aggrieved person shall be paid any amount from the

2

Settlement Fund until he or she has executed and delivered to the

3

Defendants a written release, with language approved by the United States,

4

of all lending discrimination claims, legal or equitable, that he or she might

5

have against the released entities regarding the claims asserted by the

6

United States in this lawsuit, so long as such claims accrued prior to the

7

entry of this Order; and

8

(b) The total amount paid by Defendants collectively to allegedly aggrieved

9

persons shall not exceed the total amount of the Settlement Fund, including

10

accrued interest.

f
11 15. All money not distributed to allegedly aggrieved persons from the Settlement

12 Fund, including accrued interest, within twenty-four (24) months of the date the initial

13 notification letters are sent to identified aggrieved persons, shall be distributed to , ~-
14 qualified organization(s) that provide services including credit and housing counseling

15 (including assistance in obtaining loan modification and preventing foreclosure),

16 financial literacy, and other related programs targeted at African-American and

17 Hispanic potential and former homeowners in communities where the Complaint alleges

18 significant discrimination occurred against African-American and Hispanic borrowers.

19 Recipient(s) of such funds must not be related to BAC, but may include non-profit

20 community organizations that provide education, counseling and other assistance to

21 low-income and minority borrowers in connection with obtaining credit, loan

22 modifications and other home retention activities to which Bank of America

'. t

23 Corporation has furnished substantial support. Any money remaining from the funds

24 designated for Illinois borrowers pursuant to Paragraph 9 shall be distributed to

25 qualified organizations(s) located in Illinois. Defendants will consult with and obtain

26 the non-objection of the United States in selecting recipient(s) of these funds and the

27 amount to be distrib'.lted to each, and the parties shall obtain the Court's approval prior

28 to ~istribution of any remainder of the Settlement Fund's remaining assets. Defendants

- 10 .. 


. Case 2:11-CV-10540-PSG:"JW Document 4 Filed 12/28!t'1)Page 11 of 17 Page 10 #:25

,."

,

1 shall require each recipient to submit to Defendants and the United States a detaileq

2 report on how funds are utilized within one year after the funds are distributed.

3 16. Defendants shall not be entitled a set-off, or any other reduction, of the amount

4 of payments to identified persons because of any debts owed by the identified persons.

5 Defendants also shall not refuse to make a payment based on a release of legal claims or

-6 10an-modL(ication previously signed by any identified persons. 


7

IV. EVALUATING AND MONITORING COMPLIANCE 


8 17. For the term of this Order, the Defendant shall retain.all records relating to

9 their obligations hereunder as well as their compliance activities as set forth herein. The

10 Defendants shall provide such records to the United States upon request.

11 18. In addition to the submission of any other plans or reports specified in this

12 Order, the Defendants shall submit semi-annual reports to the United States on

13 compliance with this Order. Each such report shall provide a complete account of the

14 Defendants' and Administrator's material actions to comply with each requirement of

15 this Order during the previous six months, an objective assessment of the extent to

16 which each quantifiable obligation was met in all material respects, an explanation of

17 why any particular component fell short of meeting their goal for the previous six

18 mqrtths, and any recommendations for additional. actions to achieve the goals of this

"'.~

'.~

19 Order. The Defendants shall submit their first report no later than one-hundred-eighty

20 (180) days after the Effective Date of this Order, and every one-hundred-eighty (180)

21 days thereafter for so long as the Order is in effect.

22

V. ADMINISTRATION

23 19. The Order shall expire in four (4) years or, ifearlier, on the satisfaction ofthe

24 conditions set forth in Paragraph 15 ofthis Order. Notwithstanding the above, this

25 Order may be extended further upon motion of the United States to the Court, for good

26 cause shown.

27 20. Any time limits for performance fixed by this Order may be extended by

28 mutual writtenagreement ofthe parties. Except as provided by Paragraph 14, other

- 11 ­

Case 2:11~C~-10~40-PSG:~JW Document 4 Filed 12/28/l1)page 12 of 17 Page 10 #:26

1 modifications to this Order may be made only upon approval of the Court, upon motion

2 by either party. The parties recognize that there may be changes in relevant and

3 materi~l factual circumstances during the term ofthis Order which may impact the

4 accomplishment of its goals. The parties agree to work cooperatively to discuss and

5 attempt to agree upon any proposed modifications to this Order resulting therefrom.

6 21. This Order shall be binding on the Defendants, including all its officers,

7 employees, agents, representatives, assignees, and successors in interest, and all those in

8 active concert or participation with any of them. In the event the Defendants seek to

9 transfer or assign all or part of its operations, and the successor or assignee intends on

10 carrying on the same or similar use, as a condition of sale, the Defendants shall obtain

11 the written agreement of the successor or assign to any obligations remaining under this

12 Order for its remaining term to the extent compliance with such obligations would be

13 transferred or assigned.

14 22. Nothing in this Order shall excuse the Defendants' compliance with any

15 currently or subsequently effective provision of law or order of a regulator with

16 authority over the Defendants that imposes additional obligations on the Defendants.

17 23. The parties agree that, as of the date of entry of this Order, litigation is not

"reasonably foreseeable" concerning the matters described in this Order. To the extent

that either party previously implemented a litigation hold to preserve documents,

electronically stored information, or things related to the matters described in this Order,

the party is no longer required to maintain such a litigation hold.

24. In the event that any disputes arise about the interpretation of or compliance

with the terms of this Order, the parties shall endeavor in good faith to resolve any such

• 'v

.'.l.,

.

dispute between themselves before bringing it to this Court for resolution. If the United

States believes that Defendants have violated any provision of this Order, it will provide

Defendants written notice thereof and allow thirty (30) days to resolve the alleged
110
violation before presenting the matter to this Court. In the event of either a failure by

the Defendants to perform in a timely manner any act required by this Order or an act by

- 12 ­

. Case. 2:11-cv-10540-PSG~}.JW Document 4 Fil.ed 12/28/11)page 13 of 17 Page ID #:';.7
1 the Defendants in violation of any provision hereof, the United States may moye this 2 C<?urt to impose any remedy authorized by law or equity, including attorneys' fees and 3 costs. 4 25. The Defendants' compliance with the terms of this Order shall fully and finally 5 resolve all claims of the United States Attorney General and United States Secretary of 6 Housing and Urban Development under the FHA and ECOA, except for claims by 7 aggrieved persons under 42 U.S.C. §§ 3610 and 3612, in connection with Countrywide 8 Financial Corporation, Countrywide Home Loans, Inc., and Countrywide Bapk's 9 alleged discrimination in the extension of residential credit and in the making of 10 residential real estate-related transactions between January 1,2004 and December 31, 11 2008, including all claims for equitable relief and monetary damages and penalties 12 arising from those claims. This Order does not release any claims under any statute 13 other than the FHA and the ECOA. This Order does not release legal claims for loans 14 originated by entities other than Countrywide Financial Corporation, Countrywide 15 Home Loans, Countrywide Bank, and any subsidiary of those three entities between 16 January 1,2004 and December 31, 2008, or for time periods before 2004 and after 2008. 17 26. Each party to this Order shall bear its own costs and attorneys' fees associated 18 with this litigation. 19 20 21 22 23 24 25 26
27
28
- 13 -'

Case 2:11-cV-10540-PqG~}JW Document 4 Filed 12/~8/1i1 'rage 14 of 17 Page 10 #:28

1 27. The Court shall retain jurisdiction for the duration ofthis Order to enforce the

2 terms of the Order, after which time the case shall be dismissed with prejudice.

3

So ORDERED, this Je'" day of .~~ b ~

4

5

6

STATES DISTRICT J1:JDGE

7

.... ,.

... ,

8

9

10

11

12

13

14

15

16

17

18

19

20

21

I 
 22

I
j

23

j

i,

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~

, j

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26

27

28

- 14­

Case 2:11-CV-16540-P~G)jw Document 4 Filed 12/28/11 )Page 15 of 17 Page ID #:29
.. 


The undersigned apply for and consent to the entry of this Order.

2 For Plaintiff United States: 

3 ANDRE BJROTTE JR. United States Attomey .
4

THOMAS E. PEREZ 
 Assistant Atto111ey General 
 C'h.'i1 Rights Division \ 


5
6 

LEON W. WEIDMAN 7 Chief. Civil Division
8 


M~l
STEVEN H. ROSENBAUM 
 Chief HOllsing and Civil Enforcement Section

9 


10

11

12 13

iiuJLktI

SEKRET T. SNEED

14 Assistant United States Attorney

PATRICIA L. O'BEIRNE

15

\,

16

BURTIS M. DOUOI-JERT,\

17 18

ljqJ f,1!w - ~.

19

DANIEL P. MOSTELLER

.Trial Attorneys

.

20

Housing and Civil Enforcement Section

Civil Rights Divisi911 .

21

U.S. Department ot Justlce

22

dant Countrywide Finllncial Corporation:

23

24
25 -M-. ~'H~A-E-L-W--. S-C-H-L-O-E-S-SM--ANN President
26 Countrywide Financial Corporation

27

28

- 15 ­

Case 2:11-cV-10540-P$Gf.JW Document 4 Filed 12/28/11)Page 16 of 17 Page ID #:~O

ant Countrywide Home Loans, Inc.:

2 3 -M-IC-H+A-E-L--W-. -S-C-H-L-O~E-SS-M-A-NN 4 President
Countrywide Home Loans, Inc. S 
 6 For Defendant Countrywide Bank: 


7 8 _ ~~~~ _~~~___

9

10

11 Counsel for Defendants Countrywide Financial Corporation;

12 
 Countrywide Home Loans, Inc.; and Countrywide Bank:

i, 


13 


14 K&L Gates 


15 r~ounsel tor Defendants 


'1

:..;.

16 


17 


18 


19 


20 


21 


22 


23 


24 


2S 


26 


27 


28 , 


- ]6 ­

Case 2:11-CV-10540-PSG+JW Document 4 Filed 12/28/t1 ):)age 17 of 17 Page 10 #:31

11 Counsel for Defendants Countrywide Financial Corporation;
12 Countrywide Home Loans, Inc.; and Countrywide Bank:
13

14
15 Melanie Brody 
 K&L Gates LLP 

16 1601 K Street, NW 17 Washington, DC 20006
202-778-9000 18 Counsel for Defendants
19

20

, 21

22

23

24

25

26

27

28

i

I I

- 16­

;j

 
 Case 2:11-cv-10540-PSG-AJW Document 20 Filed 01/25/16 Page 1 of 5 Page ID #:820

LORETTA E. LYNCH 1 Attorney General
VANITA GUPTA 2 Principal Deputy Assistant Attorney General
Civil Rights Division 3 STEVEN H. ROSENBAUM
Chief 4 JON M. SEWARD
Deputy Chief 5 PATRICIA L. O’BEIRNE
E-mail: Patricia.O’Beirne@usdoj.gov 6 BURTIS M. DOUGHERTY
E-mail: Burtis.M.Dougherty@usdoj.gov 7 Trial Attorneys
Housing and Civil Enforcement Section 8 Civil Rights Division
U.S. Department of Justice 9 950 Pennsylvania Avenue, N.W. - G Street
Washington, DC 20530 10 Tel: (202) 514-4713
Fax: (202) 514-1116 11 EILEEN M. DECKER
United States Attorney 12 LEON W. WEIDMAN
Chief, Civil Division 13 SEKRET SNEED
Assistant United States Attorney 14 Calif. Bar No. 217193
E-mail: Sekret.Sneed@usdoj.gov 15 Federal Building, Suite 7516
300 North Los Angeles Street 16 Los Angeles, CA 90012
Tel: (213) 894-3551 17 Fax: (213) 894-7819
Attorneys for Plaintiff 18 United States of America

E-FILED- 1/25/16 LINK#18

19

20

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

21 UNITED STATES OF AMERICA,

)

22

Plaintiff,

) )

23

v.

) )

24 COUNTRYWIDE FINANCIAL

) )

25

CORPORATION; and COUNTRYWIDE HOME LOANS, INC;

) )

26

Defendants.

) )

NO. 2:11-cv-10540-PSG-AJW [PROPOSED] AMENDED CONSENT ORDER

27

________________________________________

28

Case 2:11-cv-10540-PSG-AJW Document 20 Filed 01/25/16 Page 2 of 5 Page ID #:821

1

Pursuant to Paragraph 19 of the 2011 Consent Order entered in this action on

2 December 28, 2011, and the joint request of the parties, the 2011 Consent Order is

3 hereby amended as follows:
4

5

1. The provisions of Paragraphs 12 through 17, 20, 21, 26, and 27 are

6

extended by one (1) year, to December 30, 2016. 

7 2. Defendants have satisfied the requirements of the remaining provisions of
8

9

the 2011 Consent Order, and those provisions shall expire as originally scheduled

10

on December 28, 2015.

11 3. As of December 15, 2015, over $305 million has been distributed to
12

13

aggrieved persons from the Settlement Fund. Within sixty (60) days of the entry

14

of this Amended Order, Defendants shall present a proposal to this Court for the

15 distribution of $15,000,000.00 (fifteen million dollars) to one or more
16

17

organizations in accordance with the provisions of Paragraph 15 of the 2011

18

Consent Order.1 The parties agree that this distribution will leave sufficient funds

19 to compensate all remaining identified aggrieved persons who are participating in
20

21

this settlement.

22

23 1 Paragraph 15 provides that any funds remaining that were designated for Illinois 24 borrowers pursuant to Paragraph 9 of the 2011 Consent Order should be distributed to
qualified organization(s) located in Illinois. However, the parties agree that all funds 25 designated for Illinois borrowers will have been distributed as part of the payment of the 26 claims of individual qualified aggrieved persons. Accordingly, there is no specific
amount of remaining funds that must be made to qualified organization(s) located in 27 Illinois.
28

- 2 -

Case 2:11-cv-10540-PSG-AJW Document 20 Filed 01/25/16 Page 3 of 5 Page ID #:822

1

4. No later than October 14, 2016, Defendants shall present a proposal to this

2

Court for the distribution of all money remaining in the Settlement Fund. That

3 distribution will follow the completion of the payment of all claims to identified
4

5

aggrieved persons, in accordance with the provisions of Paragraph 15 of the 2011

6

Consent Order.

7 5. For each recipient of funds provided pursuant to Paragraph 15 of the 2011
8

9

Consent Order, the Defendants must obtain that recipient’s agreement to use the

10

funds consistent with the terms of the 2011 Consent Order. The Defendants must

11 reserve rights of recourse against any such recipient which may be exercised if
12

13

the Defendants determine that the funds have not been utilized consistent with the

14

Order.

15 6. As provided in Paragraph 15 of the 2011 Consent Order, Defendants shall
16

17

require each recipient of funds to submit to Defendants and the United States a

18

detailed report explaining how it utilized the funds. Each recipient of funds must

19 deliver its respective report(s) to the Defendants and the United States no later
20

21

than one year after the date on which it receives any such funds. The parties

22

recognize that such reports may be delivered after the expiration of the Amended

23 Consent Order.
24

25

26

27

28

- 3 -

Case 2:11-cv-10540-PSG-AJW Document 20 Filed 01/25/16 Page 4 of 5 Page ID #:823

1

2

So ORDERED, this __2_5__ day of __Ja_n_u_a_r_y______________, 20_1_6_.

3

4

5

___P__H__I_L_I_P__S__.__G__U__T__IE__R__R__E__Z____

6

UNITED STATES DISTRICT JUDGE

7 8 The undersigned apply for and consent to the entry of this Order.

9 For Plaintiff United States:

10 EILEEN M. DECKER 11 United States Attorney

12 _/s/Leon Weidman____________
13 LEON WEIDMAN Chief, Civil Division
14

15

16 SEKRET SNEED_

17 Assistant United States Attorney Calif. Bar No. 217193
18 Federal Building, Suite 7516

19

300 North Los Angeles Street Los Angeles, CA 90012

20 Email: Sekret.Sneed@usdoj.gov

21

Phone: (213) 894-3551 Fax: (213) 894-7819

22

23

24

25

26

VANITA GUPTA Principal Deputy Assistant Attorney General
STEVEN H. ROSENBAUM Chief
JON M. SEWARD Deputy Chief
__/s/Patricia L. O’Beirne______ BURTIS M. DOUGHERTY PATRICIA L. O’BEIRNE Trial Attorneys Housing and Civil Enforcement Section Civil Rights Division United States Department of Justice 950 Pennsylvania Avenue, NW – NWB Washington, DC 20530 Email: Burtis.M.Dougherty@usdoj.gov Email: Patricia.O’Beirne@usdoj.gov Phone: (202) 514-4713 Fax: (202) 514-1116

27

28

- 4 -

Case 2:11-cv-10540-PSG-AJW Document 20 Filed 01/25/16 Page 5 of 5 Page ID #:824
1 For All Defendants: 2 3 __/s/Kevin S. Asfour___________ 4 Kevin S. Asfour
K&L Gates LLP 5 10100 Santa Monica Blvd., 7th Floor 6 Los Angeles, CA 90067
Phone: +1.310.552.5016 7 Fax: +1.310.552.5001 8 kevin.asfour@klgates.com
Counsel for Defendants 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
- 5 -

 
 US Justice: Print Friendly Version

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Home » Briefing Room » Justice News

Department of Justice

FOR IMMEDIATE RELEASE

Office of Public Affairs

Wednesday, December 21, 2011

Justice Department Reaches $335 Million Settlement to Resolve Allegations of Lending Discrimination by Countrywide Financial Corporation
More than 200,000 African-American and Hispanic Borrowers who Qualified for Loans were Charged Higher Fees or Placed into Subprime Loans
The Department of Justice today filed its largest residential fair lending settlement in history to resolve allegations that Countrywide Financial Corporation and its subsidiaries engaged in a widespread pattern or practice of discrimination against qualified African-American and Hispanic borrowers in their mortgage lending from 2004 through 2008.

The settlement provides $335 million in compensation for victims of Countrywide’s discrimination during a period when Countrywide originated millions of residential mortgage loans as one of the nation’s largest single-family mortgage lenders.

The settlement, which is subject to court approval, was filed today in the U.S. District Court for the Central District of California in conjunction with the department’s complaint which alleges that Countrywide discriminated by charging more than 200,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers in both its retail and wholesale lending. The complaint alleges that these borrowers were charged higher fees and interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk.

The United States also alleges that Countrywide discriminated by steering thousands of African-American and Hispanic borrowers into subprime mortgages when nonHispanic white borrowers with similar credit profiles received prime loans. All the borrowers who were discriminated against were qualified for Countrywide mortgage loans according to Countrywide’s own underwriting criteria.

“The department’s action against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for lending discrimination,” said Attorney General Eric Holder. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin. With today’s settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation.”

The settlement resolves the United States’ pricing and steering claims against Countrywide for its discrimination against African Americans and Hispanics.

The United States’ complaint alleges that African-American and Hispanic borrowers paid more than non-Hispanic white borrowers, not based on borrower risk, but because of their race or national origin. Countrywide’s business practice allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors . This subjective and unguided pricing discretion resulted in African American and Hispanic borrowers paying more. The complaint further alleges that Countrywide was aware the fees and interest rates it was charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it.
“Countrywide’s actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We are using every tool in our law enforcement arsenal, including some that were dormant for years, to go after institutions of all sizes that discriminated against families solely because of their race or national origin.”
The United States’ complaint also alleges that, as a result of Countrywide’s policies and practices, qualified African-American and Hispanic borrowers were placed in subprime loans rather than prime loans even when similarly-qualified non-Hispanic white borrowers were placed in prime loans. The discriminatory placement of borrowers in subprime loans, also known as “steering,” occurred because it was Countrywide’s business practice to allow mortgage brokers and employees to place a loan applicant in a subprime loan even when the applicant qualified for a prime loan . In addition, Countrywide gave mortgage brokers discretion to request exceptions to the underwriting guidelines, and Countrywide’s employees had discretion to grant these exceptions.

This is the first time that the Justice Department has alleged and obtained relief for borrowers who were steered into loans based on race or national origin, a practice that systematically placed borrowers of color into subprime mortgage loan products while placing non-Hispanic white borrowers with similar creditworthiness in prime loans. By steering borrowers into subprime loans from 2004 to 2007, the complaint alleges, Countrywide harmed those qualified African-American and Hispanic borrowers. Subprime loans generally carried higher-cost terms, such as prepayment penalties and exploding adjustable interest rates that increased suddenly after two or three years, making the payments unaffordable and leaving the borrowers at a much higher risk of foreclosure.

The settlement also resolves the department’s claim that Countrywide violated the Equal Credit Opportunity Act by discriminating on the basis of marital status against non-applicant spouses of borrowers by encouraging them to sign away their home ownership rights . The law allows married individuals to apply for credit either in their own name or jointly with their spouse, even when the property is owned by both spouses. For applications made by married individuals applying solely in their own name between 2004 and 2008, Countrywide encouraged non-applicant spouses to sign quitclaim deeds or other documents transferring their legal rights and interests in jointly -held property to the borrowing spouse. Non-applicant spouses who execute a quitclaim deed risk substantial uncertainty and financial loss by losing all their rights and interests in the property securing the loan.

In addition, the settlement requires Countrywide to implement policies and practices to prevent discrimination if it returns to the lending business during the next four years. Countrywide currently operates as a subsidiary of Bank of America but does not originate new loans.

The department’s investigation into Countrywide’s lending practices began after referrals by the Board of Governors of the Federal Reserve and the Office of Thrift Supervision to the Justice Department’s Civil Rights Division in 2007 and 2008 for potential patterns or practices of discrimination by Countrywide.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and

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4/10/2012

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prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.

A copy of the complaint and proposed settlement order, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department website at www.justice.gov/fairhousing.

The proposed settlement provides for an independent administrator to contact and distribute payments of compensation at no cost to borrowers whom the Justice Department identifies as victims of Countrywide’s discrimination. The department will make a public announcement and post contact information on its website once an administrator is chosen. Borrowers who are eligible for compensation from the settlement will then be contacted by the administrator. Individuals who believe that they may have been victims of lending discrimination by Countrywide and have questions about the settlement may email the department at countrywide.settlement@usdoj.gov.

11-1694

Attorney General

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4/10/2012

 
 Case: 2:11-cv-10540 As of: 11/11/2017 04:48 PM PST 1 of 7
(AJWx),CLOSED,DISCOVERY,MANADR
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA (Western Division − Los Angeles)
CIVIL DOCKET FOR CASE #: 2:11−cv−10540−PSG−AJW

United States of America v. Countrywide Financial Corporation et al Assigned to: Judge Philip S. Gutierrez Referred to: Magistrate Judge Andrew J. Wistrich Cause: 42:405 Fair Housing Act
Plaintiff

Date Filed: 12/21/2011 Date Terminated: 12/28/2011 Jury Demand: Plaintiff Nature of Suit: 440 Civil Rights: Other Jurisdiction: U.S. Government Plaintiff

United States of America

represented by Burtis M Dougherty US Department of Justice Civil Rights Division 950 Pennsylvania Avenue NW − G St NW Bldg Washington, DC 20530 202−514−4737 Fax: 202−514−1116 Email: burtis.m.dougherty@usdoj.gov ATTORNEY TO BE NOTICED

Daniel P Mosteller US Department of Justice Civil Rights Division 950 Pennsylvania Avenue NW G Street Washington, DC 20530 202−514−4713 Fax: 202−514−1116 ATTORNEY TO BE NOTICED

Patricia L O'Beirne US Department of Justice Civil Rights Div Housing and Civil Enforcement Section − G Street 950 Pennsylvania Avenue, N.W. Washington, DC 20530 202−307−6264 Fax: 202−514−1116 Email: patricia.obeirne@usdoj.gov ATTORNEY TO BE NOTICED

Sekret T Sneed United States Attorney's Office Criminal Division Richard B. Russell Federal Building 75 Ted Turner Drive, Suite 600 Atlanta, GA 30303 404−581−6263 Fax: 404−581−6181 Email: sekret.sneed@usdoj.gov ATTORNEY TO BE NOTICED

V. Movant Javier Hernandez

represented by Lenore L Albert Law Offices of Lenore L Albert 7755 Center Avenue Suite 1100 Huntington Beach, CA 92647

Case: 2:11-cv-10540 As of: 11/11/2017 04:48 PM PST 2 of 7

714−372−2264 Fax: 419−831−3376 Email: lenalbert@interactivecounsel.com ATTORNEY TO BE NOTICED

Movant Soledad Corona

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

Movant christina corona

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

Movant Rigoberto Razo

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

Movant Cathelene Hughes

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

Movant Richard Lueras

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

Movant Mary Lueras

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

Movant Marvin Baldwin

represented by Lenore L Albert (See above for address) ATTORNEY TO BE NOTICED

V. Defendant Countrywide Financial Corporation

represented by Kevin S Asfour K&L Gates LLP 10100 Santa Monica Boulevard 8th Floor Los Angeles, CA 90067 310−552−5000 Fax: 310−552−5001 Email: kevin.asfour@klgates.com LEAD ATTORNEY ATTORNEY TO BE NOTICED
Seth M Goldstein Goodwin Procter LLP 601 Figueroa Street 41st Floor Los Angeles, CA 90017−5704 213−426−2500

Case: 2:11-cv-10540 As of: 11/11/2017 04:48 PM PST 3 of 7

Fax: 213−623−1673 Email: sgoldstein@tocounsel.com TERMINATED: 03/29/2016 ATTORNEY TO BE NOTICED

Steven A Ellis Goodwin Procter LLP 601 South Figueroa Street 41st Floor Los Angeles, CA 90017−5704 213−426−2500 Fax: 213−623−1673 Email: SEllis@goodwinprocter.com ATTORNEY TO BE NOTICED

Defendant Countrywide Home Loans Inc

represented by Kevin S Asfour (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Seth M Goldstein (See above for address) TERMINATED: 03/29/2016 ATTORNEY TO BE NOTICED

Steven A Ellis (See above for address) ATTORNEY TO BE NOTICED

Defendant Countrywide Bank

represented by Kevin S Asfour (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Seth M Goldstein (See above for address) TERMINATED: 03/29/2016 ATTORNEY TO BE NOTICED

Steven A Ellis (See above for address) ATTORNEY TO BE NOTICED

Date Filed 12/21/2011
12/21/2011 12/21/2011 12/22/2011

# Docket Text
1 COMPLAINT against defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. Case assigned to Judge Philip S. Gutierrez for all further proceedings. Discovery referred to Magistrate Judge Andrew J Wistrich; (Filing fee $ 350 NOT REQUIRED); Jury Demanded; filed by plaintiff United States of America.(esa)[LODGED PROPOSED CONSENT ORDER] Modified on 12/27/2011 (esa). (mg). (Entered: 12/27/2011)
21 DAY Summons Issued re Complaint 1 as to defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. (esa) (Entered: 12/27/2011)
2 NOTICE TO PARTIES OF ADR PROGRAM filed.(esa) (Entered: 12/27/2011)
3 STANDING ORDER regarding Newly Assigned Case: This action has been assigned to the calendar of Judge Philip S. Gutierrez. The responsibility for the progress of litigation in the Federal Courts falls not only upon the attorneys in the action, but upon the Court as well. "To secure the just, speedy, and inexpensive determination of every

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12/27/2011 12/28/2011
01/03/2012 01/05/2012 04/20/2012

action," Fed. R. Civ. P. 1, all counsel are hereby ordered to familiarize themselves with the Fed. R. Civ. P., particularly Fed. R. Civ. P. 16, 26, the Local Rules of the Central District of California, this Court's Order for Jury Trial, and this Court's Order for Court Trial (See document for further details) by Judge Philip S. Gutierrez. (ir) (Entered: 12/27/2011)
Notice of Electronic Filing re Order,, 3 e−mailed to patricia.o'beirne@usdoj.gov bounced due to CM does not handle email addresses with apostrophes well. The primary e−mail address associated with the attorney record has been deleted. Forwarded notification with a request that the attorney use an alternate email address.Pursuant to the General Order and Local Rules it is the attorneys obligation to maintain all personal contact information including e−mail address in the CM/ECF system. (tyw) TEXT ONLY ENTRY (Entered: 12/28/2011)
4 CONSENT ORDER by Judge Philip S. Gutierrez: In the event that either Countrywide Defendant reenters the business of originating residential loans, Defendants shall notify the United States at the earlier of sixty (60) days before it intends to reenter this line of business or the time that they notify their federal regulators of either Countrywide Defendant's intent to reenter this line of business. Countrywide Defendants shall also implement policies, practices and monitoring designed to prevent and detect potential fair lending violations, and shall provide the United States with the details of these policies, practices, and monitoring, forty−five (45) days prior to implementing such reentry. The United States shall have thirty (30) days to review and agree or object to the proposed policies. Within thirty (30) days of the effective date of this Order, Defendants shall cause to be deposited in an interest−bearing escrow account the total sum of three hundred and thirty−five million dollars ($335 million) to compensate allegedly aggrieved persons for monetary and other damages they may have suffered as a result of Defendants' alleged violations of the FHA and the ECOA ("Settlement Fund"). Defendants shall provide written verification of the deposit to the United States, along with the account number and identification of the depository institution, within five days of the depositing of the funds described above. Any interest that accrues shall become part of the Settlement Fund and be utilized and disposed of as set forth herein. Within sixty (60) days of entry of this Order Defendants also shall enter into a contract retaining a Settlement Administrator ("Administrator"), subject to approval by the United States, to conduct the activities set forth in the following paragraphs. The United States shall identify aggrieved persons with respect to its race and national origin discrimination claims within ninety (90) days of receipt of all the information and data it requested. The Order shall expire in four (4) years or, if earlier, on the satisfaction of the conditions set forth in Paragraph 15 of this Order. Each party to this Order shall bear its own costs and attorneys' fees associated with this litigation. The Court shall retain jurisdiction for the duration of this Order to enforce the terms of the Order, after which time the case shall be dismissed with prejudice. (see document for further details) (MD JS−6. Case Terminated) (bm) (Entered: 01/03/2012)
5 NOTICE OF DISCREPANCY AND ORDER by Judge Philip S. Gutierrez, ORDERING Motion to Access The Electronic Case Filing (ECF) System; Motion To File Brief Amicus Curiae submitted by William Michael Cunningham received on 1/3/12 is not to be filed but instead rejected. Denial based on: Other: Case closed; no further filings are permitted except a motion to reconsider judgment; PACER is available to all filers for viewing and printing only; ECF is designated only for attorneys. See attached documentation. (bm) (Entered: 01/04/2012)
6 NOTICE OF DISCREPANCY AND ORDER: by Judge Philip S. Gutierrez, ORDERING Letter to Chief Judge of th Housing and Civil Enforcement Section received on 1/3/12 is not to be filed but instead rejected. Denial based on: Other: Case is closed; no futher filings are permitted. (bm) (Entered: 01/06/2012)
8 NOTICE OF DISCREPANCY AND ORDER: by Judge Philip S. Gutierrez, ORDERING Petitioners' brief to justify why they should be included in the global mortgage settlement between USA and Bank of America submitted by Petitioners David Kissi and Edith Truvillion received on 4/19/2012 is not to be filed but instead rejected. Denial based on: Case closed. No further filings are permitted. (Attachments: # 1 Petitioners' Brief Part 2 of 3, # 2 Petitioner's Brief Part 3 of 3) (lw) (Entered: 04/23/2012)

Case: 2:11-cv-10540 As of: 11/11/2017 04:48 PM PST 5 of 7

11/30/2013
11/30/2013 12/04/2013 12/11/2013 12/11/2013 02/03/2014 02/03/2014 02/11/2014 02/18/2014 12/23/2015

9 NOTICE OF MOTION AND MOTION to Intervene ( Motion set for hearing on 1/13/2014 at 01:30 PM before Judge Philip S. Gutierrez.), MOTION to Enforce Consent Order filed by intervening plaintiffs Javier Hernandez, Soledad Corona, christina corona, Rigoberto Razo, Cathelene Hughes, Richard Lueras, Mary Lueras, Marvin Baldwin. (Attachments: # 1 Declaration, # 2 Exhibit 1, # 3 Exhibit 2, # 4 Exhibit 3, # 5 Exhibit 4, # 6 Exhibit 5, # 7 Exhibit 6, # 8 Exhibit 7, # 9 Exhibit 8)(Attorney Lenore L Albert added to party Javier Hernandez(pty:bkmov), Attorney Lenore L Albert added to party Soledad Corona(pty:bkmov), Attorney Lenore L Albert added to party christina corona(pty:bkmov), Attorney Lenore L Albert added to party Rigoberto Razo(pty:bkmov), Attorney Lenore L Albert added to party Cathelene Hughes(pty:bkmov), Attorney Lenore L Albert added to party Richard Lueras(pty:bkmov), Attorney Lenore L Albert added to party Mary Lueras(pty:bkmov), Attorney Lenore L Albert added to party Marvin Baldwin(pty:bkmov))(Albert, Lenore) (Entered: 11/30/2013)
10 Proposed Order filed by Movants Marvin Baldwin, Soledad Corona, Javier Hernandez, Cathelene Hughes, Mary Lueras, Richard Lueras, Rigoberto Razo, christina corona re: MOTION to Intervene MOTION to Enforce Consent Order 9 (Albert, Lenore) (Entered: 11/30/2013)
11 ORDER by Judge Philip S. Gutierrez: The Court hereby ORDERS the documents listed below be STRICKEN for failure to comply with the Court's Local Rules, General Orders, and/or Case Management Order: The 01/13/14 hearing date was closed on 11/25/13: 10 MOTION to Intervene; MOTION to Enforce Consent Order 9 (wm) (Entered: 12/04/2013)
12 NOTICE OF MOTION AND MOTION to Reopen Case , MOTION to Enforce Judgment filed by intervening plaintiff Marvin Baldwin, Soledad Corona, Javier Hernandez, Cathelene Hughes, Mary Lueras, Richard Lueras, Rigoberto Razo, christina corona. Motion set for hearing on 2/24/2014 at 01:30 PM before Judge Philip S. Gutierrez. (Attachments: # 1 Proposed Order, # 2 Declaration, # 3 Exhibit, # 4 Exhibit, # 5 Exhibit, # 6 Exhibit, # 7 Exhibit, # 8 Exhibit, # 9 Exhibit, # 10 Exhibit)(Albert, Lenore) (Entered: 12/11/2013)
13 NOTICE OF ERRATA filed by Movants Marvin Baldwin, Soledad Corona, Javier Hernandez, Cathelene Hughes, Mary Lueras, Richard Lueras, Rigoberto Razo, christina corona. correcting MOTION to Reopen Case MOTION to Enforce Judgment 12 (Attachments: # 1 Exhibit)(Albert, Lenore) (Entered: 12/11/2013)
14 Opposition Opposition re: MOTION to Reopen Case MOTION to Enforce Judgment 12 filed by Plaintiff United States of America. (O'Beirne, Patricia) (Entered: 02/03/2014)
15 Opposition re: MOTION to Intervene MOTION to Enforce Consent Order 9 filed by Defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. (Attorney Seth M Goldstein added to party Countrywide Bank(pty:dft), Attorney Seth M Goldstein added to party Countrywide Financial Corporation(pty:dft), Attorney Seth M Goldstein added to party Countrywide Home Loans Inc(pty:dft))(Goldstein, Seth) (Entered: 02/03/2014)
16 REPLY in support of MOTION to Reopen Case MOTION to Enforce Judgment 12 filed by Movants Marvin Baldwin, Soledad Corona, Javier Hernandez, Cathelene Hughes, Mary Lueras, Richard Lueras, Rigoberto Razo, christina corona. (Albert, Lenore) (Entered: 02/11/2014)
17 MINUTES (IN CHAMBERS) ORDER DENYING the Motion to Intervene and Enforce the Settlement Agreement by Judge Philip S. Gutierrez denying 12 Motion to Reopen Case; denying 12 Motion to Enforce Judgment: Thus, for the foregoing reasons, the Court DENIES the motion to intervene and enforce the settlement agreement. (see document for further details) (bm) (Entered: 02/18/2014)
18 NOTICE OF MOTION AND MOTION to Reopen Case to Extend Consent Order filed by plaintiff United States of America. Motion set for hearing on 2/22/2016 at 01:30 PM before Judge Philip S. Gutierrez. (Attachments: # 1 Proposed Order) (O'Beirne, Patricia) (Entered: 12/23/2015)

Case: 2:11-cv-10540 As of: 11/11/2017 04:48 PM PST 6 of 7

01/05/2016 01/25/2016 03/24/2016
03/24/2016 03/29/2016 03/29/2016
04/01/2016 04/05/2016

19 NOTICE of Appearance filed by attorney Kevin S Asfour on behalf of Defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc (Attorney Kevin S Asfour added to party Countrywide Bank(pty:dft), Attorney Kevin S Asfour added to party Countrywide Financial Corporation(pty:dft), Attorney Kevin S Asfour added to party Countrywide Home Loans Inc(pty:dft))(Asfour, Kevin) (Entered: 01/05/2016)
20 AMENDED CONSENT ORDER by Judge Philip S. Gutierrez (see document for further details). Related to: NOTICE OF MOTION AND MOTION to Reopen Case to Extend Consent Order 18 . (bm) (Entered: 01/26/2016)
21 Notice of Appearance or Withdrawal of Counsel: for attorney Steven A Ellis counsel for Defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. Adding Steven A. Ellis as counsel of record for Countrywide Financial Corporation, Countrywide Home Loans, Inc., and Countrywide Bank for the reason indicated in the G−123 Notice. Filed by Defendants Countrywide Financial Corporation, Countrywide Home Loans, Inc., and Countrywide Bank. (Attorney Steven A Ellis added to party Countrywide Bank(pty:dft), Attorney Steven A Ellis added to party Countrywide Financial Corporation(pty:dft), Attorney Steven A Ellis added to party Countrywide Home Loans Inc(pty:dft))(Ellis, Steven) (Entered: 03/24/2016)
22 STIPULATION for Extension of Time to File Motion for Entry of Disbursement Order filed by defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. (Attachments: # 1 Proposed Order)(Ellis, Steven) (Entered: 03/24/2016)
23 Notice of Appearance or Withdrawal of Counsel: for attorney Steven A Ellis counsel for Defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. Seth M. Goldstein is no longer counsel of record for the aforementioned party in this case for the reason indicated in the G−123 Notice. Filed by Defendants Countrywide Financial Corporation; Countrywide Home Loans, Inc.; and Countrywide Bank. (Ellis, Steven) (Entered: 03/29/2016)
24 ORDER GRANTING STIPULATION TO EXTEND TIME TO FILE MOTION FOR ENTRY OF DISBURSEMENT ORDER by Judge Philip S. Gutierrez, re Stipulation for Extension of Time to File 22 : Pursuant to the Stipulation submitted by Plaintiff UNITED STATES OF AMERICA and Defendants COUNTRYWIDE FINANCIAL CORPORATION; COUNTRYWIDE HOME LOANS, INC; COUNTRYWIDE BANK, and good cause appearing therefor, the Court HEREBY ORDERS as follows: The Defendants shall have up to and including April 1, 2016 to file the disbursement proposal required by Paragraph 1 of the Amended Consent Order. (bm) (Entered: 03/29/2016)
25 Joint NOTICE OF MOTION AND MOTION for Order for Entry of Disbursement Order filed by Defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. (Attachments: # 1 Proposed Order) (Ellis, Steven) (Entered: 04/01/2016)
26 DISBURSEMENT ORDER by Judge Philip S. Gutierrez granting 25 MOTION: Subject to Paragraph 3 of this Order, the Court hereby approves and authorizes the Defendants to make the following disbursements from the Settlement Fund: a. The National Urban League will receive $1,000,000.00 (one million dollars). b. National Council of La Raza will receive $1,500,000.00 (one and a half million dollars). c. Habitat for Humanity will receive $1,000,000.00 (one million dollars). d. Self−Help Ventures Fund will receive $1,500,000.00 (one and a half million dollars). e. Atlanta Neighborhood Development Partnership will receive $1,000,000.00 (one million dollars). f. Opportunity Resource Fund will receive $1,000,000.00 (one million dollars). g. Neighborhood Housing Services ("NHS") of Chicago will receive $1,500,000.00 (one and a half million dollars). h. NHS of Los Angeles County will receive $2,000,000.00 (two million dollars). i. NeighborWorks of Orange County will receive $500,000.00 (five hundred thousand dollars). j. NHS of Inland Empire will receive $500,000.00 (five hundred thousand dollars). k. NHS of New York City will receive $2,000,000.00 (two million dollars). l. NHS of South Florida will receive $1,500,000.00 (one and a half million dollars). (see document for further details) (bm) (Entered: 04/05/2016)

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10/13/2016 10/17/2016
10/26/2016 10/27/2016

27 STIPULATION for Extension of Time to File Motion for Entry of Disbursement Order filed by plaintiff United States of America. (Attachments: # 1 Proposed Order)(O'Beirne, Patricia) (Entered: 10/13/2016)
28 ORDER GRANTING STIPULATION TO EXTEND TIME TO FILE MOTION FOR ENTRY OF DISBURSEMENT ORDER 27 by Judge Philip S. Gutierrez. The Court HEREBY ORDERS as follows: The Defendants shall have up to and including October 28, 2016 to file the disbursement proposal required by Paragraph 4 of the Amended Consent Order. (lom) (Entered: 10/18/2016)
29 Joint NOTICE OF MOTION AND MOTION for Order for Entry of Second Disbursement Order filed by Defendants Countrywide Bank, Countrywide Financial Corporation, Countrywide Home Loans Inc. (Attachments: # 1 Proposed Order) (Ellis, Steven) (Entered: 10/26/2016)
30 SECOND DISBURSEMENT ORDER by Judge Philip S. Gutierrez granting 29 MOTION. (bm) (Entered: 10/28/2016)