Wells Fargo & Co. (WFC) will offer almost $60 million in cash rebates to more than 3,900 minority borrowers who were put into nonprime loans when they were eligible for prime ones under a bias settlement with the U.S.
The Justice Department, in a filing today in federal court in Washington, said the money was in addition to the $125 million payment and $50 million assistance fund that Wells Fargo agreed to in a settlement approved in September by a federal judge.
The size of the fund, which was deposited Dec. 13 into an escrow account, was based on an internal review by the bank of loans to minority borrowers. The parties agreed that San Francisco-based Wells Fargo will pay an average of $14,850 per borrower, according to the filing.
Wells Fargo, the largest U.S. mortgage lender, denies the government’s allegations that the bank caused minority borrowers to pay higher fees, costs and interest than similar white borrowers. The bank, which controls about a third of the market for all new home loans, said it agreed to settle solely to avoid litigation, according to the consent order.
Tom Goyda, a spokeswoman for Wells Fargo, said that as part of the settlement the bank agreed to conduct a statistical analysis of subprime mortgages originated through its retail channel from 2004 to 2008 to black and Hispanic borrowers who might have qualified for prime loans.
“This just quantifies that and the amount we could pay out to those borrowers,” Goyda said in a telephone interview.
The case is U.S. v. Wells Fargo Bank NA, 12-cv-01150, U.S. District Court, District of Columbia (Washington).
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