Wells Fargo sued for racial bias in mortgage loans
NEW YORK -- Two black homeowners have sued Wells Fargo & Co, accusing the second-largest U.S. mortgage lender of racial discrimination in how it sets rates and fees.
In their complaint, Nancy and Johnny Jeffries accused Wells Fargo of marking up interest rates or adding fees for black borrowers seeking mortgages after agreeing to lend based on more well-defined criteria such as credit histories and home values.
The southwest Chicago homeowners said this violates the federal Fair Housing Act and Equal Credit Opportunity Act.
Wells Fargo, the fifth-largest U.S. bank, was not available to comment. Mortgage Direct Inc, an Elmhurst-based mortgage broker, is also a defendant, court papers showed.
The lawsuit seeks class-action status, and was filed Monday against San Francisco-based Wells Fargo in the U.S. District Court for the Northern District of California.
"A black applicant is almost five times more likely to get a high-rate loan than a white applicant at Wells," Robert Rothman, a partner at Lerach Coughlin Stoia Geller Rudman & Robbins LLP, which represents plaintiffs in both cases, said in an interview.
"This is because of the discretionary pricing policy that results in loan officers adding points and fees to black borrowers."
The lawsuit differs from those that target "predatory" lenders accused of charging excessive rates or fees on subprime home loans made to borrowers with weaker credit histories.
According to the complaint, the Jeffries refinanced their home twice last year, not knowing that the interest rates they were paying were "a combination of an objective, risk-based calculation and a totally subjective, discretionary component."
The plaintiffs want Wells Fargo to halt any racially biased lending practices, improve employee training, reimburse unfair charges and pay punitive damages.