Wells Fargo is shutting down its wholesale lending business as part of a broad settlement with the Justice Department for a discriminatory lending lawsuit. The San Francisco-based bank will also pay borrowers $125 million to settle claims and commit $50 million to fund community development programs in Baltimore, Washington D.C., Chicago, Riverside and other areas negatively impacted by the housing crisis. Some other details of the lawsuit include:
- The suit was brought by the Justice Department and the Office of the Comptroller of the Currency, which has investigated Wells Fargo’s subprime lending since 2009.
- It accused Wells Fargo of steering more than 34,000 African American and Hispanic borrowers to risky subprime mortgages from 2004 to 2009.
- Though Wells Fargo settled, it denied the charges in its announcement, stating that it will conduct an internal investigation of its subprime lending during the boom years and will compensate any affected borrowers.
“These African-American and Hispanic borrowers were placed into subprime loans, with adverse terms and conditions such as high interest rates, excessive fees, prepayment penalties and unavoidable future payment hikes, when similarly qualified (white) borrowers received prime loans,” the suit stated, in language very similar to that of Illinois Attorney General Lisa Madigan, who filed a similar suit last November and whose complaints were covered in the settlement.