The Seagram Building, Home to Wells Fargo Securities in New York
This morning's headline in the Baltimore Sun read, "Wells Fargo settles bias suit for $175 M".
The City of Baltimore, according to Assistant Attorney General Thomas E. Perez said, "Baltimore got the ball rolling" and the city will receive $7.5 million in compensation as federal officials acknowledged the city was the first raising issues of discrimination related to the bank's subprime mortgages."
City officials kept getting reports minorities were getting less favorable rates than white borrowers with Wells Fargo steering them into sub-prime loans, even when some qualified for prime loans with better terms. When the sub-prime mortgage bubble burst in 2008 which subsequently brought hundreds of foreclosures it also created "blight and higher public safety costs" for the city, and thus the lawsuit brought against Wells Fargo.
The settlement gives $125 million to borrowers nationwide and $2.5 million for those in the Baltimore area with minority borrowers getting $15,000 each.
Part of the agreement has Wells Fargo paying an "independent administrator to find and compensate more than 30,000 residents nationwide affected by the bank's lending practices".
As for the blight, the bank will provide $50 million to Baltimore and seven other communities that were hit hard by the housing crisis "in direct down payment assistance to borrowers where federal officials identified large numbers of discriminated victims."
A spokesman for Wells Fargo Home Mortgage, Mike Heid said in a statement, "The bank settled this matter to avoid a long and costly legal fight" while another Wells Fargo spokesman Oscar Suris went on to say, "The bank still rejects claims that it engaged in discriminatory practices." Yeah, right!
Let's put this settlement by Wells Fargo into context; the $175 million settlement by the bank was a pittance compared to the $16 billion the bank received in profit last year.
As always in these type suits brought against the banks, part of the settlement agreement always includes this kind of disclaimer: The bank is not to be held liable for any wrongdoing on its part. This presumably forecloses the possibility that criminal suits will be brought against the bank or any of its top officials.
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