Wells Fargo, with $1.3 trillion in assets, announced on May 29 that it agreed to pay Shelby County, Tenn. and its largest city, Memphis, $7.5 million. Of these funds, $4.5 million will be dedicated to local programs that will be available later this year for down payment assistance, financial education and home renovations.
Consumers purchasing a home in either Memphis or Shelby County may qualify for grants of up to $15,000. This program will also stipulate that prospective buyers must agree to live in the homes for at least five years. Tennesseans seeking renovation assistance are eligible even if their mortgage was with another lender.
The remaining $3 million of the settlement funds will support various existing governmental programs focused on small business development, public safety initiatives, financial counseling and neighborhood revitalization.
Over the next five years, Wells has additionally pledged to lend $425 million at market rates in the city and county. Of this lending sum, $125 million will be allocated for low and middle-income homebuyers.
The settlement will end the lawsuit filed in 2009 by the city and county accusing the lender of Fair Housing Act violations by deploying discriminatory mortgage lending practices and unnecessary foreclosures. Under the settlement, residents whose homes were foreclosed by Wells Fargo will not be directly compensated.
By contrast, a recently negotiated settlement between the U.S. Justice Department and SunTrust Mortgage will directly benefit at least 20,000 African-American and Latino families in 34 states and the District of Columbia. These borrowers obtained SunTrust mortgage loans between 2005 and 2009. Together, these borrowers will share in a $21 million settlement of mortgage discrimination claims.
SunTrust Mortgage, the nation’s 11th largest commercial bank, was alleged to have discriminated against African-American and Hispanic borrowers in pricing their mortgage loans. These borrowers also qualified for loans with pricing set by SunTrust’s objective criteria.
After reviewing documents and data covering more than 850,000 residential mortgage loans between 2005 and 2009, the DOJ’s conclusion was that minority borrowers had been overcharged because SunTrust Mortgage allowed its loan officers and mortgage brokers the discretion to change a loan’s pricing. The bank encouraged this discriminatory practice by sharing the inflated charges with retail loan officers and mortgage brokers.
SunTrust did not require its employees or agents to justify or document the reasons for many of the pricing adjustments not based on borrower risk. The lender also failed to adequately monitor for and fully remedy the effects of racial disparities in these pricing adjustments.
The consumers who lost hundreds or even thousands of dollars on these mortgage markups got a measure of justice and will be comforted with some cash compensation. The real tragedy in all of these discriminatory lawsuits is that they have occurred long after federal laws were enacted to protect and prevent people of color from suffering these kinds of injustices.
We may have won our civil rights, but we still have a long journey towards ‘silver’ rights.
Charlene Crowell is the Communications Manager for State Policy & Outreach with the Center for Responsible Lending.