Wells Fargo agrees to pay $175M settlement in pricing discrimination suit
Wells Fargo will pay a $175 million settlement in a deal reached with the US Department of Justice. The DOJ alleged in its claim against the giant bank that it engaged in discrimination predatory practices and steered Black and Latino homeowners to subprime mortgages, in some instances when they qualified for prime rate.
Under a landmark $175 million deal, Wells Fargo Bank will provide $7.5 million to the city of Baltimore to settle claims it engaged in price discrimination in its subprime mortgage lending practices.
“Today’s settlement with Wells Fargo is the second largest fair lending settlement in the department’s history,” said Assistant Attorney General Thomas E. Perez, who announced the settlement on behalf of the U.S. Department of Justice.
The settlement provides $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, the company said.
Wells Fargo, the largest residential home mortgage originator in the United States, will also provide $50 million in direct down payment assistance to borrowers in communities around the country where the department identified large numbers of discrimination victims and which were hard hit by the housing crisis.
Baltimore, Maryland has some of the highest home foreclosure rates in the nation:
The federal government alleged that African-American and Latino residents were more likely to be placed in a subprime loan than their white counterparts even if they qualified for a better loan. The suit alleged the company discriminated against about 30,000 black and Hispanic borrowers between 2004 and 2009.
“At the core of the complaint is a simple story,” Perez said. “It is about the 80-year-old African-American resident of the Baltimore area with a 714 credit score and a rock solid credit file who received a subprime loan instead of a prime loan, and who was not told that she may have qualified for a prime loan with better terms. By the time she realized she had an adjustable rate mortgage, and not the fixed rate she thought, it was too late. The damage was done.”