SunTrust and Wells Fargo settle mortgage discrimination lawsuits
25th June 2012 · 0 Comments
By Charlene Crowell
In separate actions, two of the nation’s largest banks have each agreed to multi-million dollar settlements of mortgage lending lawsuits that alleged widespread discriminatory lending.
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. The governments further alleged that by targeting African-American neighborhoods for deceptive and high-cost mortgage loans as early as 2000, Wells Fargo hurt city revenue collection through lower property taxes, the need for increased public safety and housing code enforcement of abandoned and deteriorated houses.
Under the settlement, residents whose homes were foreclosed by Wells Fargo will not be directly compensated. Memphis Mayor A. C. Wharton told the Memphis Commercial Appeal, “Many times when lawsuits are filed the persons on whose behalf the lawsuit was filed might not be the ones to get the help. But as long as somebody is helped…the community still wins.”
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.
The DOJ’s investigation stemmed from a referral from the Federal Reserve Board. 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.
As Assistant Attorney General Thomas Perez observed, “If you were African-American or Latino, you likely paid more for a SunTrust loan than a similarly-qualified white borrower simply because of your skin color. You paid what amounted to a racial surtax that ranged from hundreds to thousands of dollars.”
Perez added, “SunTrust’s African-American and Latino borrowers had no idea they could have gotten a better deal. No idea that white borrowers with similar credit would pay less. That is discrimination with a smile.”
Agreeing with Perez, Federal Reserve Board Governor Elizabeth A. Duke said, “Racial or other illegal discrimination has no place in our credit markets. We are pleased that this settlement is designed to ensure fair access to credit.”
Duke is probably not the only one pleased. The consumers who lost hundreds or even thousands of dollars on these mortgage mark-ups are likely the most pleased. They 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 out civil rights; but we still have a long journey towards silver rights.
This article was originally published in the June 25, 2012 print edition of The Louisiana Weekly newspaper