Shahien Nasiripour, Huffington Post, July 26, 2011
The Department of Justice is preparing a lawsuit against Wells Fargo, the nation’s largest home mortgage lender, for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.
The company, the fourth-largest U.S. bank by assets, is currently embroiled in pre-lawsuit negotiations with the Justice Department in hopes it will settle the accusations and avoid a public lawsuit, these people said.
Last week, the Fed said that perhaps more than 10,000 borrowers were inappropriately steered into subprime mortgage loans or had their loan documents falsified by bank personnel. Wells Fargo agreed to pay $85 million to settle the civil charges. It did not admit wrongdoing.
Taken together, the various investigations paint a picture of a lender that profited by knowingly targeting less-sophisticated borrowers, in particular preying upon those communities that traditionally lacked access to a full range of consumer credit products.
Wells Fargo has fought lawsuits from Baltimore and the city of Memphis alleging that the bank preyed upon black borrowers; settled claims it illegally steered credit-worthy borrowers into subprime loans and misled investors about the risks of mortgage-backed securities it sold; and fought investigations and regulatory actions stemming from revelations that it employed so-called “robo-signers,” the agents directed by lenders to process foreclosure filings en masse without examining the underlying paperwork.
“We’re a majority African American community, and there are people in this city who take great offense when institutions take advantage of a community’s historical lack of access to credit, and in some cases lack of sophistication, by putting them in loans they can’t afford,” said George Nilson, Baltimore’s city solicitor. “It’s offensive behavior and we shouldn’t tolerate it.”