In addition, about 3,000 black and Latino borrowers will be compensated for the higher broker fees they paid to Option One.
“Option One made loans that it knew were likely to fail, and it discriminated against African-American and Latino borrowers,’’ Coakley said during a news conference yesterday.
Option One originated about 32,400 loans in Massachusetts between 2004 and 2007 - including 4,300 for black and Latino borrowers - before the market for subprime loans collapsed and the company ceased mortgage lending.
Subprime lending, rampant during the housing boom, involved loaning money at high interest rates to people with tarnished credit or incomes too low to justify the amount they borrowed.
Yesterday’s agreement, reached after more than three years of investigation and litigation by the attorney general’s office, will allow homeowners victimized by Option One to write down their principal balances or reduce their interest rate payments, depending on how their loans were structured. Black and Latino borrowers will be eligible to receive reimbursement for exorbitant payments they were required to make.
“This is a really strong settlement, because Option One was one of the most notorious practitioners of predatory mortgage loans,’’ said Lew Finfer, director of the Massachusetts Communities Action Network, a federation of community organizations that has worked extensively on foreclosure-prevention issues.
“Some of the marketing of these loans was targeted toward black and Latino home buyers, so they bore an disproportionate burden,’’ Finfer said, “but Option One’s activities also contributed to the current financial instability that we are all dealing with now.’’
Option One is now operating as Sand Canyon, whose parent company is H&R Block.
“We are pleased with the final outcome and believe this is good for all parties involved,’’ Dale Sugimoto, president of Sand Canyon, said in a prepared statement.
