Photo: Flickr/DonkeyHotey.

On Tuesday, Feb. 18, another U.S. agency was presented with a reason to investigate the mortgage lending practices of Bank of America Corp. (NYSE:BAC): the Department of Housing and Urban Development.

A new housing discrimination complaint
The National Fair Housing Alliance announced it has filed a complaint with HUD against the bank for discriminating against prospective Latino borrowers. The nonprofit group alleges Latino customers seeking home loan services were given higher cost quotes associated with a mortgage than whites, or were ignored altogether, while white customers were pursued almost immediately.

How do they know this? Because the group organized a sort of sting operation -- sending both white and Latino individuals to one of Bank of America's Charleston, S.C., branch locations over a period of several months. The treatment of these undercover "customers" showed glaring differences based, the group maintains, entirely upon which ethnic group each person belonged to.

NFHA found prospective Latino borrowers were systematically quoted higher closing costs and monthly loan payments than their white counterparts, despite being better qualified. In one instance, a less-qualified white "customer" was showered with attention from a loan officer based upon a short interview with a branch employee -- including phone calls, emails, real estate agent referrals, and mortgage loan cost estimates. The more qualified Latina also spoke with a branch employee but was never again contacted, despite assurances that a loan officer would follow up with her.

Vestiges of redlining
There is no doubt the NFHA has targeted Bank of America, which it claims has reduced Latino market share in the region compared with its banking peers. The group has another HUD complaint pending against B of A as well, in which it charges that the bank let foreclosed homes in Latino neighborhoods go to rack and ruin, even as it kept up and marketed similar properties in more affluent white areas.

The charges are reminiscent of the practice of "redlining," in which banks and insurers -- with government approval -- avoided serving low-income minority neighborhoods throughout the country because they were considered high-risk. The Community Reinvestment Act of 1977 made this practice illegal by requiring banks to lend in all neighborhoods in which they do business.

Still, problems persist. Recently, Bank of America and peers Citigroup and Wells Fargo were sued by the city of Los Angeles, which alleged a sort of "reverse redlining" of its poorest areas during the run-up to the foreclosure crisis. The suit claims the city lost more than $1 billion through predatory lending practices, in which banks pressured borrowers from low-income neighborhoods to take on subprime loans. These homes subsequently went into foreclosure, representing lost tax revenue -- and costing the city increased security and maintenance costs.

Will Bank of America pay up? Probably. Banks generally settle these cases, ponying up millions while admitting no wrongdoing. Wells Fargo settled an NFHA suit last spring for $42 million, and B of A paid out $335 million in 2011 to settle Department of Justice charges related to breaches of fair-lending laws against minority borrowers by Countrywide. With the current charges appearing to be quite recent, however, it appears that Bank of America still hasn't learned its lesson.

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Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo and owns shares of Bank of America, Citigroup, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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