On July 12, 2012, the U.S. Department of Justice announced a $175 million settlement — the second largest fair lending settlement in the department’s history — to resolve allegations that Wells Fargo Bank engaged in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009.
Under the settlement, Wells Fargo will provide$125 million in compensation for wholesale borrowers who were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin and $50 million in direct down payment assistance to borrowers in communities around the country where the DOJ identified large numbers of discrimination victims and which were hard hit by the housing crisis.
Wells Fargo is the largest residential home mortgage originator in the United States.
According to the DOJ’s press release announcing the settlement:
Wells Fargo has [also] agreed to conduct an internal review of its retail mortgage lending and will compensate African-American and Hispanic retail borrowers who were placed into subprime loans when similarly qualified white retail borrowers received prime loans. Compensation paid to any retail borrowers identified in the review process will be in addition to the $125 million to compensate wholesale borrowers who were victims of discrimination.
In its complaint, the Justice Department had alleged that
between 2004 and 2008, Wells Fargo discriminated by steering approximately 4,000 African-American and Hispanic wholesale borrowers, as well as additional retail borrowers, into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. All the borrowers who were allegedly discriminated against were qualified for Wells Fargo mortgage loans according to Well Fargo’s own underwriting criteria.
To read the DOJ’s press release regarding the settlement, click here.