Insane Thomas Perez of the Obama/Holder 'Justice' Dept extorts $175 Million from Wells Fargo
Wells Fargo Settles Federal Fair-Lending Claims for $175 Million ($50 Million for Downpayment Assistance in 8 Cities)
Jul 12, 2012
Wells Fargo to Settle Mortgage Discrimination Charges
Wells Fargo, the nation’s largest home mortgage lender, has agreed to pay at least $175 million to settle allegations that outside brokers discriminated against black and Hispanic borrowers during the housing boom, the Justice Department announced on Thursday. It is the second-largest residential fair-lending settlement in history.
An investigation by the department’s Civil Rights Division found that independent mortgage brokers originating Wells Fargo loans charged higher fees and rates to minority borrowers across the country than they did to white borrowers who posed the same credit risk, according to a complaint released on Thursday along with the proposed settlement.
Brokers working with Wells Fargo also steered minority borrowers into costlier subprime mortgages when white borrowers with similar credit risk profiles received regular loans, a Justice Department investigation found. The agreement covers the subprime bubble years of 2004-2009.
Wells Fargo is admitting no wrongdoing as part of the complaint and proposed settlement, which focuses on lax rules that the bank set for brokers working through its “wholesale” mortgage business rather than on the practices of its own employees who made “retail” mortgages. The proposed consent decree, which is subject to approval by a United States District Court, says the bank maintains that it treated all its customers fairly and is settling the case to avoid litigation.
Wells Fargo has agreed to pay $125 million to compensate individual borrowers who appear to have been steered into subprime loans, or charged higher fees, on the basis of their race or national origin. It has also agreed to contribute $50 million to a program that assists people make down payments or improve their homes in eight metropolitan areas: Baltimore, Chicago, Cleveland, Los Angeles, New York, the Oakland/San Francisco Bay Area, Philadelphia and Washington.
In December, the division settled a similar lawsuit with Bank of America for $335 million over lending discrimination by its Countrywide Financial unit. In May, SunTrust Mortgage agreed to pay $21 million in a similar case, which would become the third-largest such settlement if a federal judge accepts the deal Wells Fargo has struck with federal authorities.
The Wells Fargo case was referred to the Justice Department in 2009 by the Office of the Comptroller of the Currency, which regulates banks and provided databases of lending data to the civil rights division for analysis.
The office found data that suggested a pattern or practice of lending discrimination in the Baltimore-Washington region. The Justice Department later expanded that investigation into lending practices nationwide.
This settlement comes on the heels of the Attorney Generals Settlement, part of the Administration’s 14 loan modification initiatives.
I have some questions for the U.S. Department of Justice.
1. Why is Wells Fargo providing down payment assistance to minority borrowers in 8 large American cities? Has it dawned on the DOJ that millions of Americans in lower and middle income strata should be renting rather than owning. The DOJ is repeating the disastrous Clinton “right to home ownership” strategy that encouraged their partners Fannie Mae, Freddie Mac and lenders to streamline underwriting and expand mortgage lending to those households who couldn’t previously afford a home. [They could have rented, of course, and missed the housing bubble burst]. It seems that this settlement is the DOJ’s version of Clinton’s National Homeownership Strategy. Is is the role of the DOJ to stimulate economic growth in 8 American cities?
2. Did these borrowers shop for the best rate or terms? The burden is on the borrower to shop for the best rate and terms. No one forced them to pay fees that are higher than a competitor’s fees. But apparently the DOJ feels that borrowers have no responsibilities and the lenders are now their nannies. This is clearly the vision of Elizabeth Warren when she created the Consumer Financial Protection Bureau.
3. If borrowers didn’t understand the loan terms, why did they sign the papers? I have never understood this claim by consumer groups and Federal/State attorneys general. And nothing prevents consumer groups from explaining the terms to prospective borrowers. Of course, consumer groups rely on HUD grants (no one does this service out of altruism).
Think of it this way. You accept a job in Shanghai and you decide to purchase a home. The documents are in Chinese characters. Would you sign it? Of course not. You would hire an attorney to translate the contracts into English and then ask questions about the terms.
4. And would the borrower have complained if house prices kept growing (rather than collapsing)? Probably not.
The result of this settlement will be that Wells Fargo will likely withdraw from the wholesale lending business.
This is a political settlement, not an economic one. Consumers have to accept responsibility for not protecting their own interests and relying on Aunt Samantha (the nanny state version of Uncle Sam) to punish lenders for lending them money. And now the DOJ is encouraging borrowers to be lazy and entitled to a settlement if the lender doesn’t do what they want.
In the future, just say no if you don’t understand or like the terms of the mortgage.
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