Wells Fargo to pay $175M in loan-bias case

Wells Fargo denied the mortgage lending discrimination claims brought by the government, but agreed to settle the case.

WASHINGTON — Wells Fargo Bank will pay at least $175 million to settle accusations that it discriminated against African-American and Hispanic borrowers in violation of fair-lending laws, the Justice Department announced Thursday.

Wells Fargo, the nation’s largest residential home mortgage originator, allegedly engaged in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers from 2004 through 2009.

At a news conference, Deputy Attorney General James Cole said the bank’s discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.

Cole said that with the settlement, the second largest of its kind in history, the government will ensure that borrowers hit hard by the housing crisis will have an opportunity to access homeownership.

Wells Fargo noted in a statement that it has denied the claims.

“Wells Fargo is settling this matter solely for the purpose of avoiding contested litigation with the DOJ,” it said.

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 rather than because of differences in credit-worthiness.

Wells Fargo also will pay the remaining $50 million in direct down-payment assistance to borrowers in areas of the country where the Justice Department identified large number of discrimination victims. Those areas are Washington, D.C., Chicago, Philadelphia, Oakland/San Francisco, New York City, Cleveland, Riverside, Calif., and Baltimore.

“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 the largest bank in the Charleston region based on deposits.

The settlement will bring “swift and meaningful relief” to African-American and Hispanic borrowers who received subprime loans when they should have received prime loans or who paid more for their loans, said Thomas Perez, assistant attorney general for the Justice Department’s civil rights division.