Wells Fargo Bank To Pay $175M To Settle Mortgage Discrimination Claims

Wells Fargo Bank To Pay $175M To Settle Mortgage Discrimination Claims

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.

Settlement Documents

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 Act.

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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