Wells Fargo Settles for Discriminatory Lending Practices
Wells Fargo has agreed to pay $175 million to settle government charges that it discriminated against qualified African-American and Latino borrowers in its mortgage lending from 2004 through 2009. The Department of Justice (DOJ) announced the settlement on July 12, 2012, making it the second largest fair lending settlement in the DOJ’s history after its December 2011 settlement with Bank of America for $335 million.
The DOJ investigation concluded that Wells Fargo knowingly allowed its loan officers and mortgage brokers to vary interest rates and fees without providing any justification. The investigation showed that, with these loose boundaries, Wells Fargo routinely charged higher rates and fees to African-American and Latino borrowers. Thomas Perez of the DOJ noted that “[a]ll too frequently, Wells Fargo’s African-American and Latino borrowers had no idea they could have gotten a better deal — no idea that white borrowers with similar credit would pay less.”
Wells Fargo agreed to pay $125 million in compensation for wholesale borrowers who were steered toward subprime mortgages or who paid higher fees and rates than white borrowers with the same credit risk. Wells Fargo also agreed to pay $50 million in down payment assistance to urban areas hit particularly hard by the housing crisis, such as New York, Chicago and the San Francisco Bay Area. The settlement included resolving several lawsuits from other entities, including the city of Baltimore and the Pennsylvania Human Rights Commission.
The trouble is not over for Wells Fargo, however. The DOJ is now investigating similar complaints relating to “retail” mortgages that were originated by Wells Fargo during the same period. In response, Wells Fargo has agreed to conduct an internal review of its retail mortgages and has agreed to compensate African-American and Latino borrowers who were improperly given subprime loans. The DOJ announced that compensation paid to any retail borrowers identified in Wells Fargo’s review process will be in addition to the $125 million to compensate wholesale borrowers.
Tagged in: Housing and Mortgage Fraud,