Wells Fargo has entered into a collaborative agreement that will provide Tennessee communities with $432.5 million after facing a mortgage lending lawsuit. The suit stemmed from accusations that the bank participated in discriminatory lending practices in Memphis and surrounding Shelby County, TN resulting in some homeowners paying so much for their mortgages that they defaulted on their home loans.
Wells Fargo Denies Discriminatory Lending
Wells Fargo announced on Tuesday that a lawsuit filed by the Tennessee communities alleging that the lender participated in discriminatory lending practices was dropped.
The suit, filed in 2010 against the San Francisco-based bank, claimed Wells Fargo targeted African-American neighborhoods for predatory home loans as far back as the year 2000. The lawsuit alleged that the bank’s actions have resulted in excessive foreclosures in the targeted areas.
Wells Fargo, which writes more than one in three home loans, denied the allegations, citing its longstanding commitment to fair and responsible lending.
In the meantime, it is facing a similar lawsuit filed in the city of Baltimore and the U.S. Department of Justice is looking into bringing civil charges against the bank under laws that prohibit discrimination against minority homebuyers.
Home Loans Lending Suit Issues Millions to Borrowers
In its collaborative agreement, Wells Fargo agreed to set a five-year mortgage lending goal of $425 million for the city and county. This includes $125 million to help low- and moderate-income borrowers purchase homes, according to the bank.
The lender also agreed to contribute $4.5 million for down payment assistance and home renovations under a company program that will start in the city later this year, along with $3 million for local economic initiatives.
This is not the first time a bank has agreed to settle charges against it for discriminatory lending practices.
In December, Bank of America’s Countrywide Financial unit was accused of charging African-American and Hispanic borrowers higher interest rates and fees than Caucasian borrowers and steering minorities into more expensive subprime loans even though they qualified for traditional mortgage rates.
Though Countrywide denied the allegations, it agreed to pay a record $335 million to settle the mortgage lending suit.