Bank pays for predatory racially-based lending
Wells Fargo has set aside $175 million to settle racial discrimination and predatory lending allegations for illegal practices that allegedly defrauded more than a thousand African-American homeowners.
The decision between Wells Fargo and the United States Department of Justice — the lead agency investigating the claims — effectively ends the investigation, according to the Pennsylvania Human Relations Commission. The fund will include $2 million for city residents, and an additional $50 million for alleged victims living in eight metropolitan areas, including the Philadelphia-Camden-Wilmington area.
“Fair housing is a right in Pennsylvania,” Commission Chairman Gerry Robinson said. “This settlement will help ensure that it is a reality.”
The settlement directly affects African-American homeowners who obtained home loans from Wells Fargo between January 1, 2004, and December 31, 2009. Rebates will also go to homeowners who may have qualified for prime loans, but were instead issued non-prime rates from Wells Fargo.
“I was shocked that there was enough of a ‘smoking gun’ that it ended up in a settlement, but the fact is that in this day and age that these discriminatory practices take place,” said Housing Alliance of Pennsylvania Executive Director Liz Hersh, who also mentioned that homeownership rates among African-American and Latinos is still significantly low. “If they can now make this right and give people a chance, that’s great.”
According to the PHRC, the investigation, which began in July 2010, initially looked at the mortgage and foreclosure policies and practices with Wells Fargo Home Mortgage and Wells Fargo Financial Pa. Inc., and found the company liberally employed a “redlining” tactic — which targets African-American homeowners, regardless of ability to repay.
“The commission investigation was prompted by its statistical analysis of U.S. Dept. of Housing and Urban Development statistics, conducted with HUD funding,” read a statement from the PHRC. “The study revealed substantial disparities in pricing and foreclosure rates between African-American and white borrowers. Such practices would violate the HUD enforced federal Fair Housing Act, and the PHRA, which the commission enforces.”
Congressman Chaka Fattah, a longtime proponent of equal housing causes, commended Attorney General Eric Holder and the U.S. Justice Department for battling to “right the wrongs of this national disgrace.”
“The $175 million settlement with Wells Fargo, one of the nation’s largest lenders, is an indication that aggressive investigation can result in justice for those victimized by patterns of discrimination on the basis of race or national origin. While instances of severe racial profiling and discrimination in home mortgage lending, predatory practices, misleading paperwork and hard-sell for sub-prime mortgages extend back at least to 2004, serious investigation of these allegations didn’t begin until after the Obama Administration took office in 2009,” Fattah said. “I have been urging the Department of Justice since 2009 to step up the pace of investigations, and led the fight in the House Appropriations Committee for the extra resources that have helped fund these probes.
“In addition, as a legislator who has won enactment for programs to assist distressed homeowners on the state and national level going back to the 1980s in Pennsylvania,” Fattah continued, “I’m gratified that today’s beneficiaries include about 1,030 African-American homebuyers in the Philadelphia area who may have been victims of illegal predatory lending.”