Wells Fargo involved in race discrimination

originally appeared in the San Francisco Examiner from Reuters:

Wells Fargo has agreed to pay $175 million to resolve allegations that the financial institution discriminated against qualified black and Hispanic borrowers in its mortgage lending according to the U.S. Justice Department.

In the second-largest settlement of its kind, the biggest U.S. mortgage lender will pay $125 million to borrowers who were allegedly steered into higher-priced subprime loans or who paid higher fees and rates than white borrowers.

Wells Fargo also will contribute $50 million to homebuyer assistance programs in eight metropolitan areas around the country. The government identified those areas as needing the most help in recovering from the housing crisis.

The settlement, which needs approval from a judge, would end the investigation into whether the fourth-largest U.S. bank knowingly targeted minorities between 2004 and 2009 for risky mortgages that came with higher costs, according to documents filed in the U.S. District Court for the District of Columbia.

The U.S. assistant attorney general for civil rights, said at a news conference in Washington, D.C. that this a case about real people, African-American and Latino, who suffered real harm as a result of Wells Fargo’s discriminatory lending practices, people with similar qualifications should be treated similarly. They should be judged by the content of their credit worthiness and not the color of their skin.

The government investigation found that loans submitted to Wells Fargo by mortgage brokers had varied interest rates, fees and costs based only on race and not correlated to the borrowers’ creditworthiness, according to the court document.

The Obama administration has mounted a campaign to closely monitor banks in order to ensure loan discrimination practices that were a part of the housing bust and led to record defaults are eliminated. Bank of America’s Countrywide Financial unit agreed in December to pay a record $335 million to settle similar charges.

Wells Fargo said it was settling the matter solely for the purpose of avoiding contested litigation with the U.S. Justice Department. In the consent order with the government, Wells asserted it treated all its customers fairly and without regard to race and national origin.

Wells Fargo Home Mortgage president said in a statement that he believes it is in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight, and to instead devote our resources to continuing to contribute to the country’s housing recovery.