Wells Fargo will pay out $175 million over discrimination claims
Wells Fargo Bank will have to fork out $175 million for allegedly engaging in discriminatory lending practices from 2004 through 2009, following a Justice Department announcement, Crain’s reported. The country’s largest residential mortgage lender is accused of a pattern of prejudicial practices that forced 34,000 African-American and Hispanic borrowers across 36 states and the District of Columbia to pay higher rates for loans simply because of their race, according to Deputy Attorney General James Cole.
The settlement is the second largest of its kind in U.S. history, with the bank paying $125 million in compensation to minority borrowers who were directed to subprime mortgages, or made to pay higher fees and rates than white borrowers with equally sound credit. Wells Fargo will pay an additional $50 million in down payment assistance to borrowers in areas the Justice Department has identified as having a large number of discrimination victims, including Washington, D.C., Chicago, Philadelphia, Oakland and San Francisco, New York City, Cleveland and Baltimore.
As The Real Deal previously reported, Wells Fargo has recently embarked on an aggressive lending strategy in an attempt to increase its shareholder revenue. In the first quarter of 2012, the bank originating 33.9 percent of all mortgages in the country – more than three times its closest competitor.
“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. Wells Fargo is denying the charge, and settling merely to “avoiding contested litigation with the DOJ” it said in a statement. [Crain’s]