Wells Fargo settles accusations that it preyed on minority borrowers
I think it’s Wells Fargo & Co.’s turn to be our bad boy bank of the week.
I suspect Barclays and its merry band of LIBOR fraudsters will be back in the spotlight by Monday.
But we have to note that Wells has agreed to a $175 million settlement with the Department of Justice to settle allegations that it discriminated against African Americans and Hispanics.
The U.S. Department of Justice said the bank failed to keep an eye on the army of independent mortgage brokers peddling its home loans from 2004 through 2009.
As a result, more than 30,000 minority borrowers were charged higher fees or interest rates on their mortgages than white borrowers with similar credit histories.
An additional 4,000 were steered toward subprime mortgages by brokers, even though they had the same credit risk as white borrowers who received prime loans.
The complaint against Wells Fargo citied data that showed Chicago-area customers who borrowed $300,000 through an independent broker in 2007 were charged an average $2,937 more in lender fees if they were African American and $2,187 more if they were Hispanic.
Of course, Wells Fargo admitted no wrongdoing in accepting the deal and agreeing to compensate its victims.
This comes just over month after Wells Fargo settled another discrimination suit, this one brought by the city of Memphis and Shelby County, Tenn., for $432.5 million.
In that instance, local officials accused Wells of pressuring African-American homeowners into refinancing their homes with risky high-interest, high-fee mortgages.
“The way we were told to sell these loans was to explain that we were eliminating the customers’ old debt by consolidating their existing debts into one new one,” Doris Dancy, a former Wells Fargo credit manager, said in court documents quoted in the local newspaper.
“This was not really true,” Dancy said. “We were actually just giving them a new, more expensive loan that put their house at risk.”
Wells sold so many of these mortgages in minority neighborhoods that entire communities were destabilized by the ensuing wave of foreclosures.
That’s quite a record for the nation’s largest originator of residential mortgages.