Coakley sues subprime lender Option One for racial discrimination

Massachusetts Attorney General Martha Coakley (right) filed a lawsuit today against Option One Mortgage Corp., charging that the subprime lender discriminated against blacks and Latinos by targeting them for the high-risk mortgages and by charging them higher application fees than it charged white customers.

The lawsuit, filed in Suffolk Superior Court in Boston, also claimed that Option One engaged in unfair and deceptive lending practices when selling the loans. This is the first state suit against a subprime lender that alleges discrimination, Coakley's office said.

Option One "has significantly contributed to the foreclosure crisis in Massachusetts," Coakley's office said.

Option One could not be reached immediately for comment.

Recent Massachusetts studies of data that lenders are required to submit to federal regulators have shown that blacks and Lations were far more likely to obtain subprime mortgages. These data show that even blacks and Latinos earning high incomes had a higher probability of receiving the loans.

The suit said the loans had "layers" of risk, including 100 percent financing that require no downpayment; low introductory rates that spiked two years after the loan started; and no requirement that borrowers prove their incomes.

Option One "induced homeowners to accept their risky loan products by failing to clearly and conspicuously disclose how much and how soon" the interest rate would rise, the lawsuit said.
(By Kimberly Blanton, Globe staff)