Wells Fargo Said to Be in Talks With U.S. in Lending Probe
By Justin Blum and Tom Schoenberg - Jul 27, 2011 3:34 PM CT
Wells Fargo & Co. is being probed whether the lender directed blacks to subprime loans, a person familiar with the matter said. Photographer: Jin Lee/Bloomberg
Wells Fargo & Co. (WFC), the biggest U.S. home lender, is negotiating with the Justice Department to resolve a probe of whether the lender directed blacks to subprime loans, a person familiar with the matter said.
The investigation is being conducted by the Justice Department’s Civil Rights Division and involves the lender’s actions during the housing bubble, said the person, who wasn’t authorized to speak publicly.
Wells Fargo still faces a 2008 lawsuit by the city of Baltimore alleging a “pattern or practice of illegal and discriminatory mortgage lending” leading to foreclosures on Wells Fargo loans in minority neighborhoods.
And last week, the bank agreed to pay a record $85 million fine and compensate clients to settle Federal Reserve claims that it steered reliable borrowers into subprime loans and falsified information in mortgage applications.
Employees at the firm’s Wells Fargo Financial unit pushed customers who may have been eligible for prime interest rates into loans carrying higher rates intended for riskier borrowers, the Fed said in a July 20 statement announcing the accord.
Separately, sales personnel used false documents to make it appear borrowers qualified for loans when their incomes made them ineligible, the Fed said.
‘Confident’
Vickee Adams, a spokeswoman for San Francisco-based Wells Fargo, and Alisa Finelli, a Justice Department spokeswoman, declined to comment on the U.S. discriminatory lending investigation. Of the Baltimore case, Adams said the bank is “confident in our position in the lawsuit.”
Under its settlement with The Fed, Wells Fargo must reevaluate qualifications of borrowers who received a subprime, cash-out refinancing loan between January 2006 and June 2008.
The fine was the largest assessed by the regulator in a consumer-protection enforcement case, according to the statement. The bank didn’t admit wrongdoing in agreeing to settle, the government said.
The U.S. settlement talks were reported earlier in the Huffington Post news and opinion web site.
The Baltimore case is Mayor and City Council of Baltimore v. Wells Fargo, 08-cv-00062, U.S. District Court, District of Maryland (Baltimore).
To contact the reporters on this story: Justin Blum in Washington at jblum4@bloomberg.netand; Tom Schoenberg in Washington at tschoenberg@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net and; Mark Silva at msilva34@bloomberg.net
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