LOS ANGELES (CBS) — Thousands of Southern California homeowners will be getting monetary relief after Wells Fargo Bank settled allegations that it steered qualified African American and Hispanic borrowers into more expensive subprime loans.
The Department of Justice says $175 million settlement with Wells Fargo is the second-largest fair lending settlement in the department’s history.
The settlement will provide $125 million in compensation for wholesale borrowers who were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin.
“An applicant’s creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for,” Deputy Attorney General James M. Cole said in a statement.
The consent decree filed Thursday also requires Wells Fargo to establish a borrower assistance program that provides $50 million in direct payments for downpayment assistance to residents.
Wells Fargo was accused of routinely discriminating against qualifying African American and Hispanic borrowers by charging them higher fees or rates and improperly placing them in subprime loans between 2004 and 2009.
In the Inland Empire – including Riverside, San Bernardino and Ontario, federal officials estimate about 1,300 people could receive more than $3 million in homebuyer assistance.
In Central Los Angeles County, about 4,500 victims could potentially receive more than $10 million in damages.