WASHINGTON, D.C. - (Mealey's) In what the U.S. Department
of Justice is calling the second largest fair lending settlement in the
department's history, Wells Fargo Bank NA on July 12 agreed to pay more than
$175 million to settle claims in a District of Columbia federal court that it
discriminated against African-American and Hispanic borrowers by steering them
into subprime mortgage loans, even though they were qualified borrowers (United
States of America v. Wells Fargo Bank, NA, No. 12-1150, D. D.C.).
According to a motion for entry of consent order and
proposed consent order filed by the Justice Department in the U.S. District
Court for the District of Columbia,
Wells Fargo will pay $125 million in compensation "for wholesale borrowers who
were steered into subprime mortgages or who paid higher fees than white borrowers
because of their race or national origin."
Wells Fargo also will pay $50 million "in direct down
payment assistance to borrowers in communities around the country where the
department identified large numbers of discrimination victims and which were
hard hit by the housing crisis," has agreed to undergo an internal review
of its retail mortgage lending and will compensate, with monies in addition to
the $125 million in compensation, all African-American and Hispanic borrowers
who were put into subprime loans while similarly qualified white borrowers were
placed into prime loans.
The settlement is subject to court approval.
In its complaint, the Justice Department alleges that
between 2004 and 2008, Wells Fargo discriminatorily steered more than 4,000
African-American and Hispanic wholesale and retail borrowers into subprime
mortgages while white borrowers "with similar credit profiles" received prime
loans, in violation of the Fair Housing Act and the Equal Credit Opportunity
In addition, the Justice Department claims that from 2004
to 2009, Wells Fargo also discriminated against African-American and Hispanic
wholesale borrowers by charging higher fees and rates than it charged for white
borrowers "because of their race or national origin rather than the borrowers'
credit worthiness or other objective criteria related to borrower risk."
The Justice Department is represented by Attorney General
Eric H. Holder Jr., Thomas E. Perez, Steven H. Rosenbaum, Jon M. Seward, Elizabeth
Parr Hecker, Holly C. Lincoln and Coty R. Montag of the Department of Justice,
U.S. Attorney for the District of Columbia Ronald C. Machen Jr. and Daniel F.
Van Horn and Javier M. Guzman of the Office of the U.S. Attorney for the
District of Columbia. All are in Washington.
Wells Fargo is represented by John Longstreth of K&L
Gates in Washington.
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