Wells Fargo will shell out $10 million to settle a city lawsuit that alleged the megabank engaged in discriminatory lending practices against Black people and other minorities in Philadelphia.
The San Francisco-based bank will fund affordable housing programs in Philadelphia but admit no wrongdoing over the civil rights lawsuit the city filed in 2017, the Kenney administration said Monday in a released statement.
Under the terms of the settlement, the nation’s fourth largest bank will set aside $8.5 million for low- and moderate-income homebuyers to help with down payments and closing costs. The Philadelphia Housing Development Corporation will administrator the distribution of the grants.
Three nonprofits will share $1 million to implement the city’s Residential Mortgage Foreclosure Prevention Program, and the city will use $500,000 for its land care program to revitalize and maintain vacant lots.
As part of the agreement, Wells Fargo and the city will collaborate on a program for the bank’s employees to educate them about the city’s diversity, history of its housing market and current housing needs.
Mayor Jim Kenney applauded the settlement, saying low-income Philadelphians must be assured they face a level playing field as they pursue homeownership, which brings stability, security and pride to individuals and communities alike.
“This agreement brings substantial support to the very communities that most need this assistance,” the mayor said in the released statement. “Philadelphia is committed to ensuring that no one faces additional hurdles toward home ownership because of their race or ethnicity.”
Marcel Pratt, the city’s solicitor who led the city’s litigation effort, said the settlement brings tangible and significant benefits to communities of color.
Joe Kirk, Wells Fargo Region Bank President for Greater Philadelphia, said the settlement was part of the bank’s long-term commitment to address the nationwide affordable housing crisis.
“We’re pleased that we’ve been able to resolve this matter in a way that will provide real, tangible sustainable homeownership opportunities for many low- and moderate-income residents of Philadelphia,” Kirk said.
In the lawsuit, Philadelphia officials alleged the city sustained economic damages due to Wells Fargo’s longstanding and ongoing practice of intentionally steering minority borrowers in Philadelphia into discriminatory mortgage loans, i.e. loans with higher costs and risks than those for white borrowers.
The bank’s policy created artificial and arbitrary barriers to fair housing opportunities for minority homebuyers and owners, according to the lawsuit.
The city also alleged Wells Fargo maintained a policy that did not extend credit to minority borrowers seeking to refinance their loans while offering those opportunities to white borrowers.
The bank’s practices not only suppressed property values in minority and low-income communities throughout Philadelphia, but reduced property tax revenues and increased the cost of providing municipal services, according to the lawsuit.
The city alleged Wells Fargo’s policies violated the Fair Housing Act of 1968.
The lending industry’s history of redlining in Philadelphia has not ended.
Black Philadelphians were 2.7 times more likely to be denied conventional mortgages than whites, according to a 2018 report by the Center for Investigative Reporting.
Redlining is the withholding of home-loan funds or insurance from neighborhoods considered poor economic risks, traditionally based on the racial or ethnic makeup of those areas.
State Attorney General Josh Shapiro, a Democrat, has an ongoing investigation into the practices of the lending industry in Philadelphia, said Jacklin Rhoads, a spokeswoman for the office. Last year, a Shapiro surrogate testified about the investigation during a City Council hearing.
Rhoads declined to comment further or confirm whether the office was investigating Wells Fargo as part of the probe.
Councilman Kenyatta Johnson, a Democrat re-elected to another four-year term in November, lead a hearing in 2018 to investigate redlining.
Vincent Thompson, a spokesman for Johnson, said in an email that Philadelphia’s home loan market has some of the worst racial disparities in the nation, which were comparable to old redlining practices.
“These disparities hurt all Philadelphians,” he said.
Thompson said the councilman would continue to probe the prevalence of redlining in the city during his next term, which starts in January.