Wells Fargo & Co has promised $432.5 million in lending and other payments to end a lawsuit accusing the bank of discriminatory lending practices in Memphis, Tennessee.
The fourth-largest bank by assets has set a five-year lending goal in Memphis and surrounding Shelby County of $425 million, including $125 million for home purchases for low and moderate income borrowers, the bank said in a statement on Tuesday.
Wells 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. The bank will also contribute $3 million toward local economic initiatives.
The San Francisco-based bank is the largest U.S. mortgage originator, writing more than one in three home loans.
Memphis and Shelby County filed a lawsuit in 2010 against Wells Fargo, accusing the bank of targeting of African-American neighborhoods for predatory loans. The suit alleged the practice, which dated to 2000, resulted in excessive foreclosures in those neighborhoods.
Wells Fargo has denied the allegations, citing its longstanding commitment to fair and responsible lending. The city of Baltimore has filed a similar suit against Wells.
“We agreed that it was in the best interests of everyone involved to work together rather than to continue to be involved in a protracted legal fight,” Leigh Collier, Wells Fargo’s regional president for the mid-south region said in a statement.
The Memphis agreement comes as Wells Fargo faces potential civil charges from the U.S. Department of Justice under laws that prohibit discrimination against minority homebuyers.
The bank said in a securities filing on May 8 that it believes the charges should not be brought and that it is seeking to show the department that it is in compliance with fair lending laws. [ID: nL1E8G83NB]
Bank of America Corp’s Countrywide Financial unit agreed in December to pay a record $335 million to settle similar charges.
The Justice Department accused Countrywide of charging blacks and Hispanics higher interest rates and fees than whites, and steering minorities to more expensive subprime loans even though they were qualified for traditional mortgage rates. Countrywide denied the department’s allegations.
Source: Reuters.com
