Wells Fargo to pay $175M in lending settlement

PETE YOST

Asso­ci­ated Press

WASHINGTON — Wells Fargo Bank will pay at least $175 mil­lion to set­tle accu­sa­tions that it dis­crim­i­nated against African-American 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 or prac­tice of dis­crim­i­na­tion against qual­i­fied African-American and His­panic bor­row­ers from 2004 through 2009.

At a news con­fer­ence, Deputy Attor­ney Gen­eral James Cole said the bank’s dis­crim­i­na­tory lend­ing prac­tices resulted in more than 34,000 African-American and His­panic bor­row­ers in 36 states and the Dis­trict of Colum­bia pay­ing higher rates for loans solely because of the color of their skin.

Cole said that with the set­tle­ment, the sec­ond largest of its kind in his­tory, the gov­ern­ment will ensure that bor­row­ers hit hard by the hous­ing cri­sis will have an oppor­tu­nity to access homeownership.

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 and San Fran­cisco, New York City, Cleve­land, River­side, Calif., and Baltimore.

“The department’s action makes clear that we will hold finan­cial insti­tu­tions account­able, includ­ing some of the nation’s largest, for lend­ing dis­crim­i­na­tion,” Cole said.

The set­tle­ment will bring “swift and mean­ing­ful relief” to African-American and His­panic bor­row­ers who received sub­prime loans when they should have received prime loans or who paid more for their loans, said Thomas Perez, assis­tant attor­ney gen­eral for the Jus­tice Department’s civil rights division.

Perez 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 paid on aver­age $2,538 more than a sim­i­larly qual­i­fied white appli­cant. The racial sur­tax for African Amer­i­cans in Miami in 2007 was $3,657.”

Wells Fargo noted in a state­ment that it has denied the claims.

“Wells Fargo is set­tling this mat­ter solely for the pur­pose of avoid­ing con­tested lit­i­ga­tion with the DOJ,” it said, “and to instead devote its resources to con­tin­u­ing to pro­vide fair credit ser­vices and choices to eli­gi­ble cus­tomers and impor­tant and mean­ing­ful assis­tance to bor­row­ers in dis­tressed U.S. real estate markets.”

The part of the set­tle­ment for $125 mil­lion deals with mort­gages that were priced and sold by inde­pen­dent mort­gage bro­kers through Wells Fargo’s whole­sale chan­nel. The finan­cial insti­tu­tion said that it is dis­con­tin­u­ing financ­ing mort­gages that are orig­i­nated, priced and sold by inde­pen­dent mort­gage bro­kers through the mort­gage whole­sale channel.

“Through our sep­a­rate deci­sion to no longer fund mort­gages through inde­pen­dent mort­gage bro­kers, we can con­trol how that com­mit­ment” to serv­ing home own­er­ship needs “is met on every mort­gage that Wells Fargo makes,” said Mike Heid, pres­i­dent of Wells Fargo Home Mortgage.

Posted by AP News on Jul 12 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.