Wells Fargo & Co., the largest U.S. mortgage lender, will pay $125 million and set up a $50 million assistance fund to settle U.S. allegations that it discriminated against minority borrowers. The bank says it will stop using outside brokers to create mortgages. The accord settles accusations that Wells Fargo put creditworthy Hispanic and African-American borrowers into more expensive subprime loans from 2004 to 2007, and that mortgage brokers through 2009 added charges that caused minority borrowers to pay higher fees, costs and interest than similar white borrowers. It appears senior officials knew that this wrongdoing was occurring.
The settlement with Wells Fargo is the second largest fair-lending accord ever reached by the Justice Department. The largest was a record $335 million paid by Bank of America Corp. last year. Countrywide, acquired by Bank of America in 2008, assessed higher fees and interest rates on more than 200,000 black and Hispanic borrowers. The Justice Department investigation of Wells Fargo uncovered “systemic discrimination” in the bank’s lending practices. About 34,000 borrowers in total were affected.
In some cases, Wells Fargo steered many borrowers into adjustable-rate mortgages with so-called teaser rates when they qualified for more standard loans, such as those with 30-year fixed rates, the U.S. said in its complaint. The bank created financial incentives by sharing the higher revenue with employees and brokers, the government said. The settlement ends litigation filed in Illinois and a complaint from Pennsylvania, according to the bank. Wells Fargo also agreed to commit $50 million in direct payments for down-payment assistance in eight U.S. regions where the U.S. alleges the discrimination practices had a significant impact.
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.