Feds fine Wells Fargo over discrimination claims

The U.S. Justice Department said Thursday, July 12, that Wells Fargo will pay at least $175 million to settle claims that it discriminated against African-American and Hispanic borrowers. / AP Graphics

(CBS/AP) WASHINGTON - Wells Fargo Bank (WFC) 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.

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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.

The settlement is in the form of a "consent decree" between the government and Wells Fargo, and must be approved by a court.

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.

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[FormerUSMCSergeant]

by willccc July 12, 2012 1:51 PM EDT
All hispanics and african-americans should leave wells fargo and never do business with them
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My wife, who is Hispanic, closed her account there today.

[Pred3]

Based on the statement ""Wells Fargo is settling this matter solely for the purpose of avoiding contested litigation with the DOJ" the bench should reject the settlement or double it and recommend a criminal investigation/follow-up by DOJ.

[DiceAreLoaded]

Based on the circumstances that lead to this, Wells Fargo might actually welcome this! The wrongdoing (and it DID occur) was not by a Wells Fargo employee, but by a number of companies that did business WITH Wells Fargo. This is akin to suing Sony because Best Buy discriminated against you. Let there be a criminal investigation.

[MegaProcrastination]

I left Wells Fargo when they told me they require a thumbprint on a notorization. I didn't want to give them the thumbprint so then they tried to tell me it was state law. Since the papers needing my signature were going to a prosecuting attorney's office I called and asked them. No, indeed, there is no law requiring such a thing where I live. I walked across the street to another bank and opened an account there, got the papers signed and notorized then closed all my accounts with Wells Fargo and moved them across the street. WF still holds my mortgage, though, but as soon as possible I'll be refinancing elsewhere as well.

[willccc]

All hispanics and african-americans should leave wells fargo and never do business with them. I left those scum buckets. Then they will feel it when we minoritys leave them and they lose a big chunck of profits.