Wells Fargo Prepping For Possible Racial Discrimination Lawsuit

Though it hasn’t been formally accused of anything by the government, Wells Fargo let it be known in a filing with the Securities & Exchange Commission that the Justice Dept. may soon be alleging the bank was involved in discriminating against minority mortgage applicants.

This news comes nearly a year after it was first revealed that the DOJ was investigating claims that Wells Fargo steered minority applicants into subprime mortgages.

In its SEC filing, Wells Fargo reiterated its belief that it did nothing wrong and that no charges should be brought against the bank.

Wells Fargo has already been penalized $85 million by the Federal Reserve over allegations that, among other charges, it pushed applicants who would have qualified for standard loans into risky adjustable-rate mortgages.

Last December, the DOJ reached a whopping $335 million settlement with Countrywide over charges that the lender’s policy was to push subprime loans on minorities, regardless of whether they would have qualified for a standard loan.

Wells Fargo discloses potential discrimination suit [Chicago Tribune]

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  1. r-nice says:

    Quite frankly, i’m shocked.

  2. StarKillerX says:

    Wait what???

    So WF already admitted, and was penalized because it “pushed applicants who would have qualified for standard loans into risky adjustable-rate mortgages” but the DOJ is investigating if they pushed MINORITY applicants into risky adjustable-rate mortgages?

    It would seem to me that the only color they cared about was green.

    Let’s be honest shall we? Most “predominantly black neighborhoods” are not the choicest areas to live in, and thus those buying there likely don’t have the best income and/or credit so should we really be surprised if there were a higher then average rate of sub-prime mortages issued in them?

    Who is more likely to need a sub-prime mortage, Bill Gates if he buys an estate in the Hamptons or Terell buying a house in Newark?

    • Hi_Hello says:

      yup.

      Unless they mainly went after the minor minority (asian or hispanic or whatever race there is in this country other than black and white) I don’t think they it’s a valid law suit.

      although, if this works, I can see the government going after custom rims seller. I”m not sure what the stats for the whole country, but around here it’s mainly minorities that has it.

      • blogger X says:

        I just don’t understand why people put out twice the amount for those rims than the value of the car they’re attached to.

        • StarKillerX says:

          Hey, a couple years ago there was actually a K-car around here with spinners on it, I almost ran off the road the first time I saw it. lol!

    • CubeRat says:

      I think the 85 million settlement was concerning a case brought against one of the banks WF bought. WF bought several banks, Wachovia being the largest, and there were lawsuits pending. For the most part, WF – like most companies – tries to just settle the cases. Over the past several years there have been a lot of lawsuits against banks that failed, and the new owner becomes the defendant in these suits.
      i.e. BofA for Countrywide issues; Chase for WaMu issues.
      I know there was some money laundering concerning Wachovia that WF settled and there was some fraud concerning investments sold to Native American tribes in the SW that settled.

    • Mrs. w/1 child says:

      There you go – using common sense again…Keep it up and see what happens.

    • iesika says:

      My old school district got in trouble for the crappy quality of its buildings (asbestos, etc) and instruction, and also got in trouble for shunting minority kids to the crappiest of the crap schools.

      The issues are related to each other, but different kinds of rulebreaking.

      • StarKillerX says:

        Totally different since in your example they were singling out minorities and treating them worse then others but with Well Fargo simply appears to have been screwing over everyone they could, and any difference was likely based more of economics then on race.

        A low income person is likely to have far fewer options for financing a home then a middle/upper income person so it would make sense that a much higher percentage of them would get sub-prime mortages. Now add that to the simple truth that a higher percentage of blacks are low income then whites so of course it follows that a blacks would recieve sub-prime mortages at a higher rate then whites.

    • kingofmars says:

      Wells Fargo didn’t care about making long term money on the sub-prime loans. They only cared about packaging the loans up and selling them off for a quick profit.

      The issue is that Wells Fargo was steering applicants that qualified for better loans to crappier loans based on race, not location. Yes there is a possibility that there are more sub-prime loans taken out in lower income areas, but that’s not the issue here. It’s that Wells Fargo used race as a determining factor in generating the loan.

  3. Bort says:

    How interesting, the bank is looking to fleece all customers as far as the law allows (also called charging what the market will bear), but may have decided they could get away with charging more to people of a certain race
    I see 2 problems here, not just one.

    • StarKillerX says:

      Actually I would think that WF believes in equal opportunity when it comes to screwing people over, and instead of being about races it’s more about economics.

      Consider that blacks are more likely to be low income then a caucasian person, so wouldn’t it make sense that a higher number of blacks would have sub-prime loans since they were created to allowed higher risk people to still get home loans?

      • Bort says:

        Presumably they believed minorities would be more likely to accept sub prime mortgages.

  4. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Wait – didn’t the government get its panties in a twist 5 or 6 years ago and accuse banks of not lending to minorities enough? Something about home ownership and redlining?

    So, and I’m not defending WF in any way, a bank makes loans, but they’re not the type of loans the government likes, so now they’re in trouble anyway, first for not making loans and then for making them?

    Makes perfect sense now that I think about it, and the parties involved.

  5. dush says:

    If the larger percentage of minorities had employment or credit problems wouldn’t it naturally follow that the loans available to them would be subprime?
    If the bank hadn’t offered them any subprime loan at all and instead turned them away would they now be sued for discrimination for not offering loans to minorities?

    • kingofmars says:

      This issue isn’t about people with employment or credit issues. It’s about people who would have qualified for better loans being pushed into riskier loans, and if that was done based on the person’s race.

      • voogru says:

        Except you can’t really ever prove that. Just because they might be a minority AND because they got in a supprime loan doesn’t mean it was cause of racism.

        Especially if you find instances of people who were not a minority and got pushed into subprime loans within the same time frame.

        • kingofmars says:

          I think it can be proven in two ways.
          1. Testimony, have people come in who were steered into subprime loans. Ask them if they were ever offered a better loan. Wells Fargo would then have to explain why they steered that person into that loan.
          2. Pull up a list of people who qualified for a more conventional loan. See how many of those people went with a subprime instead. If there is a large portion that had good credentials, went with a subprime, and were minorities, then there is proof that there was a systemic push to put minorities into subprime loans.

  6. CommonSense(ಠ_ಠ) says:

    They pushed those loans on everyone.
    Race or skin color had nothing to do with it.

    I find i pathetic that people keep trying to use their race or skin color to get out of their bad decisions. Credit scores do not change based on race or color, neither does how much cash you have and those are what the loans are based on.

    • Dieflatermous says:

      RTFA, pressuring people who were eligible for regular mortgages get sub-prime if they weren’t white, and calling them “mud-skins” and “mud people” in office emails is pretty freaking racist.

  7. voogru says:

    Newsflash: You do not have a right to a loan.

  8. voogru says:

    Newsflash:

    What is the one thing banks care about?

    MAKING MONEY.

    Do banks care about anything else? Nope!

    All banks want is MORE MONEY. They’re greedy sons of bitches!

    So, if you go into a bank, and a bank thinks they can make money off of you, do you think they’re going to turn away more money? Probably not.

    Does the bank care about the people who give them money? No.
    Do they care if they’re black, white, Hispanic? Nope. All they care about is the GREEN stuff.

    They just want money. Remember, they’re greedy!

    So with that said, and I’m sure most of you will agree with the above statements, do you find it absurd that we have discrimination laws when it comes to lending?

    When banks don’t make loans it’s because they think they’ll lose money on the deal, not because of skin color.

    Except now we have banks making risky loans because they’re more worried about lawsuits for discrimination. I hate to break it to you people, but you have a right to discriminate. We all do it.

    • magnetic says:

      “When banks don’t make loans it’s because they think they’ll lose money on the deal, not because of skin color.”

      That’s the thing here: they were explicitly screwing nonwhite applicants, lying about the terms of the loans, defrauding them.

      RTFA, and notice that they weren’t just being savvy and doing all they could to squeeze customers. They were doing more than is allowable.

      • voogru says:

        And why were they able to do that?

        Why, because the federal government was buying mortgages like it was going out of style.

  9. magnetic says:

    This is what made me finally go through the trouble of switching away from WF.

  10. magnetic says:

    There’s evidence that there was a explicit policy of screwing “mud people.” RTFA, and accept that people in power know what they can get away with – they got away with some horrendous stuff here for a while, until the DOJ got wind of it.