Southland Black and Latino homeowners — and others across the country who say the nation’s largest mortgage lender unfairly charged them higher rates — could receive compensation under a settlement.
The federal Justice Department, which filed the settlement, announced today it’s resolved $175 million of fair lending claims with Wells Fargo. U.S. Deputy Attorney General James Cole says if a federal judge approves the settlement it'll become the second largest of its kind.
“With today’s settlement, the federal government will ensure that African American and Hispanic borrowers who are discriminated against will be entitled to compensation and borrowers and communities hit hard by this housing crisis will have the opportunity to access home ownership,” Cole said.
Cole says the Justice Department's civil rights division investigated and determined the mortgage lender — through independent brokers — steered minority borrowers into costly subprime loans and piled on higher fees compared to whites who had similar credit risks, specifically between the years of 2004 and 2009.
“Systematic discrimination was discovered in Wells Fargo’s lending practices," Cole said. "This resulted in more than 34,000 African American and Hispanic wholesale borrowers paying an increased rate for loans, simply due to the color of their skin."
Wells Fargo denies the claims. Representatives say the bank is settling the matter to avoid taking on the Justice Department in an expensive legal fight. Wells Fargo has said it won’t finance mortgages through independent brokers from now on.
As part of the compensation package, Wells Fargo will deliver $50 million in direct down payment assistance to borrowers in places hit hard by the housing crisis — including Riverside, Oakland and San Francisco. Borrowers would receive an average of $15,000. People the bank allegedly charged exorbitant fees would receive between a $1,000 and $3,500 each.