Thu July 12, 2012
Wells Fargo Agrees To $175 Million Settlement Over Lending Discrimination
Wells Fargo Bank agreed to pay at least $175 million Thursday to resolve allegations it discriminated against black and Latino home buyers, in what the Justice Department called the second largest settlement over fair lending violations.
The bank allegedly charged minority borrowers higher rates and fees and sometimes steered them into subprime loans when they would have qualified for regular loans, Justice Department officials said. At least 34,000 people may have been victimized by the practices in 36 states and the District of Columbia.
"This is a case about real people, African American and Latino, who suffered real harm as a result of Wells Fargo's discriminatory lending practices," said Assistant Attorney General Tom Perez, who leads the civil rights division at the Justice Department.
Authorities say they reviewed 2.7 million loans that originated between 2004 and 2009, the height of the housing boom. A separate review of loans originated from the bank's own retail business could add about 4,000 more victims to the settlement.
Perez, of the civil rights division, offered some examples of how about 30,000 minorities were disadvantaged by higher fees. A black wholesale mortgage customer in the Chicago area, he said, paid on average $2,937 more than a white applicant with similar qualifications. And in Miami, a black borrower seeking a $300,000 loan paid an extra $3,657 in what Perez called a "racial surtax."
Wells Fargo said the allegations mostly stem from mortgages sold by independent mortgage brokers. The bank said in a statement that it is "settling this matter solely for the purpose of avoiding contested litigation with the DOJ."
Today's deal also covers pending lawsuits filed by the state of Illinois and the Pennsylvania Human Relations Commission. Wells Fargo said it would enter into a separate agreement with the city of Baltimore, under which the city will withdraw its lawsuit and the bank will provide funds for community improvement and foreclosure related initiatives.
The agreement with Wells Fargo marks the second largest fair lending settlement in history, the Justice Department said, after a deal last December with Countrywide. Bank of America, which owns Countrywide agreed to pay $335 million.
As we've reported, a November 2011 report from Center for Responsible Lending found that during the housing bubble "borrowers of color were 'twice as likely to receive subprime loans' than their white counterparts and now that the housing bubble has burst, borrowers of color 'are more than twice as likely to lose their home as white households.'"
"The department's action makes clear that we will hold financial institutions accountable, including some of the nation's largest, for lending discrimination," said deputy attorney general Jim Cole.