DOJ Announces Subprime Mortgage Settlement with Wells Fargo
A multi-million dollar fair-lending settlement was recent announced by the Justice Department. Specifically, the settlement concludes a particular dispute in which it was alleged that lender Wells Fargo & Co. had steered minority borrowers wishing to buy a home to high-cost, subprime mortgages - many of which are now in foreclosure.
For Wells Fargo borrowers whose loans were originated by non-bank mortgage brokers - around 34,000 nationwide - the national settlement amounts to $175 million. For borrowers who received loans directly from Wells Fargo, another unspecified sum will be used to compensate these victims. This additional sum is estimated to be many millions of dollars.
In Illinois alone, 3,300 borrowers will split $8 million of the settlement - averaging $15,000 for all customers who were wrongfully guided to subprime mortgages from 2004 to 2009. Also, minority customers who were unjustly charged with higher mortgage fees will receive an average of $1,500 to $2,000.
Illinois Minority Lending Lawsuit
When commenting on the Wells Fargo settlement, Illinois Attorney General Lisa Madigan told the Chicago Tribune, "It's not an understatement at all to say that there's an entire generation of wealth in minority communities that's been taken away. The settlement won't roll back the clock but it is a significant step forward to hold banks accountable."
Moreover, Illinois was the sole state to file its own charges against Wells Fargo regarding their lending practices to minorities. The case - which was filed by AG Lisa Madigan on July 31, 2009 - accuses Wells Fargo of selling high-cost mortgages to Latino and African-American homebuyers while they would give white homebuyers with similar credit ratings much lower cost mortgages. The lawsuit is currently in the discovery phase.
Supporting these claims is a Chicago Reporter study that unearthed some disturbing trends. For example, only 22 percent of Chicago-area white homebuyers earning less than $40,000 were given high-cost, subprime mortgages in 2007 - compared to 34 percent of African-American homebuyers, which is especially alarming given that these homebuyers earned more than $120,000 annually.
While this settlement is certainly a step in the right direction, it will do little to help those homebuyers who have already lost their home to foreclosure. If you are currently facing a foreclosure, it may help to speak with an experienced foreclosure defense attorney who can explain a wide variety of options - such as bankruptcy, which can stop a foreclosure in its tracks.
Source: Chicago Tribune, "Wells Fargo to pay $175M in subprime mortgage settlement," Mary Ellen Podmolik, July 12, 2012