Another discrimination suit for Wells Fargo
Not yet announced formally by the government, the Chicago Tribune1 is reporting that Wells Fargo has disclosed through a filing with the Securities and Exchange Commission (SEC) that the Justice Department (DOJ) may soon allege that the bank was involved in discriminating against minority mortgage applicants.
Although no formal accusations have been charged, it is not news that the Justice Department has been investigating claims that Wells Fargo steered minority applicants into risky, higher cost mortgages than what they qualified for, particularly subprime loans.
Although in the SEC filing, Wells Fargo asserted that it did nothing wrong and that no charges should be brought against them, this is not the first legal trouble they’ve seen over alleged steering of minorities, take the 2011 lawsuit filed by the Illinois Attorney General make the same allegations as the DOJ is said to be on the verge of making.
Wells already hit by Federal Reserve for $85M
The bank has already been penalized $85 million by the Federal Reserve who also alleged that Wells Fargo steered applicants who would have qualified for standard mortgages into high risk adjustable-rate loans.
Similarly, the DOJ settled with Countrywide (now owned by Bank of America) last winter for $335 over similar charges that Countrywide’s policy was to steer minorities into subprime mortgages, whether they qualified for a standard loan or not.
In the case of the Illinois AG lawsuit, Wells Fargo allegedly gave financial incentives to employees who steered borrowers eligible for prime mortgages into riskier, more expensive mortgage loans. Wells Fargo denies these charges, claiming they have filters in place to prevent steering, but the lawsuit says those filters were very easy to skirt and it was common for employees to do so in exchange for bonuses.
Although some have blamed subprime mortgages for the housing crash, others claim otherwise; but with the DOJ likely to announce a case against Wells Fargo, it is certain that their $85 million payout is only just the beginning.