Discrimination Lawsuit: Wells Fargo Agrees To Pay $175 Million

Wells Fargo has agreed to pay at least $175 million to settle accusations that the company violated fair-lending laws by discriminating against minority borrowers in Riverside and elsewhere during the housing boom, the Justice Department announced today.

The settlement provides compensation for black and Latino borrowers in the counties of Riverside, Los Angeles, and San Bernardino who were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin.

Under the agreement, Wells Fargo -- the nation's largest mortgage lender -- also will institute a borrower assistance program that provides $50 million in direct payments for down payment assistance to Inland Empire and Los Angeles residents, among others, who were harmed as a result of the lender's conduct from 2004 through 2009.

Based on DOJ estimates, 1,300 people in the Inland Empire could receive more than $3 million in homebuyer assistance. In addition, qualified buyers could receive up to $15,000 in down payment assistance, closing costs or, under certain conditions, home-repair financing.

About 4,500 victims in Los Angeles County could receive more than $10 million in damages, according to the DOJ.

In a statement, Wells Fargo denied the allegations and blamed independent mortgage brokers for causing most of the problems. The lender said it was settling the case to avoid prolonged litigation and will no longer fund mortgages sold by independent brokers.

All the borrowers who were allegedly discriminated against were qualified for Wells Fargo mortgage loans according to the bank's own underwriting criteria, according to the government.

"An applicant's creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for," Deputy Attorney General James M. Cole said.

"With today's settlement, the federal government will ensure that African-American and Hispanic borrowers who were discriminated against will be entitled to compensation and borrowers in communities hit hard by this housing crisis will have an opportunity to access home ownership," he said.

The government also alleges that Wells Fargo discriminated by charging approximately 30,000 black and Latino wholesale borrowers higher fees and rates than whites because of their race or national origin rather than their credit or other objective criteria related to borrower risk.

Thomas E. Perez, the DOJ's Assistant Attorney General for the Civil Rights Division, promised "swift and meaningful relief" for plaintiffs.

The settlement, which is subject to court approval, was filed in the U.S. District Court for the District of Columbia.

In what is considered the largest fair-lending settlement in DOJ history, Bank of America Corp. agreed to pay $335 million last December to settle claims against Calabasas-based Countrywide Financial Corp.