John Stumpf, president of Wells Fargo since 2005
Wells Fargo, the nation’s largest mortgage lender, cheated at least 34,000 minority homeowners during the 2004-2008 housing boom, either charging them more for their mortgages or steering them into risky loans. For these acts of discrimination the bank has agreed to pay a penalty of $175 million, while not admitting any wrongdoing.
Out of the $175 million settlement, the bank will pay $125 million to the black and Hispanic individuals who were victimized by Wells Fargo’s racist lending practices. The other $50 million will go towards direct down payment assistance to borrowers in communities that were hit hard by the housing crisis and disproportionately impacted by the bank’s discriminatory loans.
The U.S. Department of Justice said it went after Wells Fargo after finding it had conned black and Hispanic borrowers into paying more than white homeowners—“not based on borrower risk, but because of their race or national origin.”
Using a practice known as “steering,” Wells Fargo gave 4,000 African-Americans and Hispanics subprime mortgages even when they qualified for prime loans.
Mike Heid, president of Wells Fargo Home Mortgage, told The New York Times that the bank agreed to settle the case “because we believe 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.”
The settlement awaits final approval by a federal judge.
The Wells Fargo case follows another involving Bank of America, which agreed late last year to pay $335 million to resolve similar charges against Countrywide, which it acquired in 2008.
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