Today, after action by the Justice Department, Wells Fargo & Co. settled allegations of discrimination against minority borrowers and announced that it would no longer continue working with mortgage brokers.
The company will have to pay at least $175 million in cash to black and Hispanic borrowers who were steered into subprime mortgages or charged higher prices for loans in minority neighborhoods.
The Justice Department estimates that approximately 30,000 borrowers were charged higher fees and approximately 4,000 steered into risky subprime loans. Borrowers in these two groups will receive an average of $2,000 and $15,000, respectively.
In a statement, Wells Fargo said it “not only denies that it discriminated unlawfully, but affirmatively asserts that it has treated all of its customers without regard to race or national origin.” The company maintains that it settled “for the purpose of avoiding contested litigation with the Department of Justice.”
This is not the first time a mortgage lender has been accused of steering borrowers into more costly mortgages. Last year, Bank of America had to pay $335 million to settle allegations that Countrywide Financial Corp discriminated against more than 210,000 black and Hispanic borrowers.
In response to these allegations, Wells Fargo announced today that it would stop working with mortgage brokers, which currently represents approximately 5% of the company’s home loan volume.
Do you think this settlement will affect the perceptions of Wells Fargo, or did the nation’s largest mortgage lender get off easy?