Wells Fargo has agreed to pay the Department of Justice $175 million dollars to settle allegations it had discriminated against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009.
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, said the DOJ. Wells Fargo will also offer $50 million in down payment assistance to borrowers in communities around the country where the DOJ has identified large numbers of discrimination victims and which were hard hit by the housing crisis.
Wells Fargo admitted no wrongdoing and has denied the government’s charges. “Wells Fargo 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, and important and meaningful assistance to borrowers in distressed U.S. real estate markets,” the financial services company wrote in a press release.
The federal government alleges that between 2004 and 2008, Wells Fargo steered 4,000 African-American and Hispanic borrowers into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. All those borrowers had qualified for regular Wells Fargo loans according to Well Fargo’s criteria.
The bank also is accused of charging about 30,000 African-American and Hispanic borrowers higher fees and rates than non-Hispanic white borrowers based on their race or national origin instead of their credit worthiness or other objective criteria related to borrower risk.
"At the core of the complaint is a simple story. If you were African-American or Latino, you were more likely to be placed in a subprime loan or pay more for your mortgage loan, even though you were qualified and deserved better treatment. This is a case about real people —African American and Latino — who suffered real harm as a result of Wells Fargo’s discriminatory lending practices," said Assistant Attorney General Thomas E. Perez.
Wells Fargo has faced other litigation related to its banking practices and loans. Last year the NAACP and Wells Fargo announced they would open a Financial Freedom Center to promote financial literacy. The center was the outgrowth of a discrimination lawsuit filed by the civil rights organization that was dropped after the bank agreed to participate in the initiative.
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