(7/18/2012) - In the second largest fair lending settlement in the U.S.
Department of Justice's history, the nation's largest mortgage lender has
agreed to $175 million in restitutions for ethnic minority borrowers, as
well as ethnic minority wholesale and retail lenders.
DOJ filed the settlement to resolve allegations that Wells Fargo, from
2004 through 2009, engaged in an abusive pattern of improperly steering
minority wholesale borrowers into subprime mortgages or forcing them to pay
higher fees, compared to white wholesale operations.
Of the settlement, $125 million in compensation goes to minority
wholesale borrowers. Wells Fargo will also provide $50 million in direct
down payment assistance to individual minority borrowers in communities hard
hit by the housing crisis where DOJ also identified large numbers of discrimination
Wells Fargo also promised to conduct an internal review of its retail
mortgage lending operations. In addition to the $125 million to wholesale
borrowers, the bank said it will compensate African-American and Hispanic
retail borrowers who were placed into subprime loans when similarly
qualified white retail borrowers received prime loans.
As is typical of such settlements, Wells Fargo "denies the claims...and is settling
this matter solely for the purpose of avoiding contested litigation with the
DOJ, and to instead devote its resources to continuing to provide fair
credit services and choices to eligible consumers..." Well Fargo announced
in a prepared statement.
In the statement, Wells Fargo also announced and end to its wholesale
"...We are fully committed to fair and responsible lending. Through our
separate decision to no longer fund mortgages through independent mortgage
brokers, we can control how that commitment is met on every mortgage that
Wells Fargo makes," said Mike Heid, president of Wells Fargo Home
Wells Fargo is also under investigation by the U.S. Department of Housing
and Urban Development where the National Fair Housing
Alliance (NFHA) filed a discrimination claim alleging Wells Fargo
maintains and markets real estate owned (REO bank owned properties)
properties in white neighborhoods better than it does in minority
Other banks were included in a NFHA investigation of discrimination
related to REO properties. Also, private housing discrimination suits
are on the rise.
"The National Fair Housing Alliance applauds the Department of Justice
for holding Wells Fargo accountable for widespread discriminatory lending
practices that we know have damaged communities across the country and
undermined our nation¹s mortgage market...but we know much more needs to be
done by our nation's banks to repair the damage to communities of color that have been
long-time targets of lending discrimination," said Shanna L. Smith,
president and CEO of NFHA.
Smith said large inventories of shunned bank-owned properties in minority
neighborhoods have left municipalities with declining tax bases and
neighborhoods with battles against public safety and health hazards.
The DOJ-Wells Fargo settlement, recently filed in the U.S. District Court
for the District of Columbia, alleges that between 2004 and 2008, Wells
Fargo discriminated by steering approximately 4,000 African-American and
Hispanic wholesale borrowers, as well as additional retail borrowers, into
subprime mortgages. All the borrowers who were allegedly discriminated
against were qualified for Wells Fargo mortgage loans according to Well
Fargo's own underwriting criteria.
Among a growing number of discrimination claims, the DOJ claim also said, between
2004 and 2009, Wells Fargo discriminated by charging approximately 30,000
African-American and Hispanic wholesale borrowers higher fees and rates than
non-Hispanic white borrowers because of their race or national origin rather
than the borrowers' credit worthiness or other objective criteria related to
"By reaching a settlement in this case, African-American and Hispanic
wholesale borrowers who received subprime loans when they should have
received prime loans or who paid more for their loans will get swift and
meaningful relief," said Thomas E. Perez, assistant attorney general for the
DOJ's Civil Rights Division.
"As one of the largest mortgage lenders in the country, Wells Fargo's
commitment to conduct an internal review of its retail lending and
compensate African American and Hispanic retail borrowers who may have been
improperly placed in subprime loans is significant. We will continue to work
aggressively to ensure that all qualified borrowers have access to credit on
an equal basis," Perez
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