Posted Jul 12, 2012 04:47 pm CDT
The U.S. Justice Department has announced that Wells Fargo will pay at least $175 million to resolve claims of bias against minority mortgage borrowers in the second largest fair-lending settlement in DOJ history.
According to the Justice Department’s complaint (PDF), Wells Fargo discriminated against 34,000 African-American and Hispanic borrowers in residential mortgage lending during the mortgage boom beginning in 2004. A press release and the New York Times have summaries.
About 30,000 minority borrowers who received loans through mortgage brokers during that period paid higher fees and costs for their mortgages than whites, the complaint says. Another 4,000 minority borrowers who received loans through brokers received more expensive subprime loans rather than prime loans.
The department says Well Fargo allowed mortgage brokers to set loan prices and place borrowers into loan products that were not connected to their creditworthiness. The bank created financial incentives by sharing increased revenues from the loans with employees and mortgage brokers.
Wells Fargo did not admit wrongdoing in the proposed consent decree (PDF). The bank says it settled the case to avoid litigation and it treated all of its customers fairly.
Wells Fargo will provide $125 million in compensation for individual borrowers and $50 million in funding for a program that provides down payment assistance. After an internal review, the bank will compensate any minority borrowers who were improperly steered into subprime loans by bank employees.
The government settled a similar suit involving Countrywide, now owned by Bank of America, for $335 million in December.