Wells Fargo settles foreclosure discrimination claim

A housing group gets $27 million after saying that the bank took better care of seized properties in white communities than in those that were predominantly black or Latino.

By Jason Notte Jun 6, 2013 4:27PM
File photo of Wells Fargo & Co. signage at a bank branch in New York (© Scott Eells/Bloomberg via Getty Images)Homeowners in certain neighborhoods who lived around foreclosed homes owned by Wells Fargo (WFC) and U.S. Bancorp (USB) knew the institutions were discriminating against them and their neighbors. Now they're getting some payback.

The Chicago Tribune reports that the National Fair Housing Alliance and members in 13 cities across the country will receive $27 million from Wells Fargo to resolve a 14-month-old federal discrimination complaint.

The groups charged that the bank took better care of the foreclosed properties it owned in white neighborhoods than those in African-American and Latino communities.

The alliance says the $27 million will be used to improve homeownership and stabilize neighborhoods in 19 cities. The consortium of private, nonprofit housing groups filed complaints with the Department of Housing and Urban Development against Wells Fargo and U.S. Bancorp in April 2012. Last fall, it leveled similar charges against Bank of America (BAC).

The $27 million payout is the first to result from those complaints, but isn't the last of what's coming from Wells Fargo. The bank will pay an additional $11.5 million to the U.S. Department of Housing and Urban Development toward neighborhood stabilization efforts in 25 other cities.

Wells Fargo committed to a set of standards for maintaining and marketing repossessed properties. It also vowed that owner-occupants will receive priority over investors when a foreclosed home is first listed for sale and every time the list price is reduced.

"This is a huge step in the right direction and more is needed to get our neighborhoods, especially communities of color, back on their feet," Shanna Smith, the alliance's president and CEO, told the Tribune.

Even with the housing market improving, accusations of discrimination still crop up from time to time. Last fall, a study by Chicago nonprofit The Woodstock Institute found that women who applied for a mortgage loan were 24% less likely to get one than their male counterparts. When women tried to refinance an existing mortgage, lenders were 39% less likely to approve them than they were to approve men making the same request.

More on moneyNOW

Jun 6, 2013 6:15PM
On average, whites earn considerably more than blacks or Latinos. With higher incomes, whites are more likely to spend more on housing.

Banks, in turn, invest more time maintaining more expensive properties. It is in their financial best interest to do so.

It was probably just cheaper to settle than go to litigation and win.
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