Wells Fargo will pay $175M to settle charges
7/13/2012WASHINGTON -- Wells Fargo Bank will pay at least $175 million to settle accusations that it discriminated against black and Hispanic borrowers in violation of fair-lending laws, the Justice Department announced Thursday.
Wells Fargo, the nation's largest residential home mortgage originator, allegedly engaged in a pattern of discrimination against qualified black and Hispanic borrowers from 2004 through 2009.
Deputy Attorney General James Cole said the bank's discriminatory lending practices resulted in more than 34,000 black and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.
Mr. Cole said that with the settlement, the government will ensure that borrowers hit hard by the housing crisis will have an opportunity to access homeownership.
The settlement still requires court approval, but it would be the second largest ever, behind the $335 million settlement with Countrywide, a lender that was swallowed up by Bank of America.
The bank will pay $125 million in compensation for borrowers who were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin rather than because of differences in credit-worthiness.
Wells Fargo also will pay $50 million in direct down payment assistance to borrowers in areas of the country where the Justice Department identified large number of discrimination victims. Those areas are Washington, D.C., Chicago, Philadelphia, Oakland, San Francisco, New York City, Cleveland, Riverside, Calif., and Baltimore.
"The department's action makes clear that we will hold financial institutions accountable," Mr. Cole said.
Thomas Perez, assistant attorney general for the Justice Department's civil rights division, said that because of the bank's practices "an African-American wholesale customer in the Chicago area in 2007 seeking a $300,000 loan paid on average $2,937 more in fees than a similarly qualified white applicant. And these fees were not based on any objective factors relating to credit risk. These fees amounted to a racial surtax. A Latino borrower in the Miami area in 2007 seeking a $300,000 loan paid on average $2,538 more than a similarly qualified white applicant."
Wells Fargo noted in a statement that it has denied the claims.