The mortgage crisis of 2008 has revealed the true color of money: black and white. On July 12, Wells Fargo — the largest residential mortgage lender in the United States — agreed to a $175 million settlement in a racial-discrimination suit brought by the Department of Justice.
The case originated with charges first alleged by the city of Baltimore four years ago, in which officials accused Wells Fargo of “systemic discrimination” — steering African-American and Latino borrowers into high-cost loans and charging them excessive fees.
Critics agree that $175 million is only a small fraction of the damage done, but it represents the second-largest fair-lending settlement in the DOJ’s history. It follows last year’s $335 million settlement with Bank of America over similar accusations arising from the practices of Countrywide Financial — the mortgage unit that Bank of America acquired in 2008. SunTrust Bank was also assessed a $21 million fee for engaging in discriminatory lending practices just two months ago, and investigations are ongoing at Citigroup, JPMorgan Chase and other major lenders.
What is disturbing is that as a condition of the settlement agreements, all three companies refused to admit guilt — instead, each concluded that settling was a way to avoid years of litigation. As such, no criminal charges were brought, nor punitive damages applied. And despite all the hopes of good intentions, it is quite likely that these practices will continue.
So what actually happened? According to the Washington Post, 34,000 black and Latino borrowers across 36 states were targeted for unfavorable loans between 2004 and 2009 — the height of the subprime-lending boom. The Justice Department found that, among Wells Fargo mortgages, highly qualified black borrowers were four times as likely — and Latino borrowers three times as likely — as whites with similar profiles to receive a subprime loan. In addition, the DOJ determined that these practices may have affected as many as 400,000 minority borrowers nationwide…
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