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Wells Fargo accused of discriminatory lending

August 01, 2007|From Reuters

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 criteria such as credit histories and home values. The Chicago homeowners said this violated the federal Fair Housing Act and Equal Credit Opportunity Act.

The lawsuit, which seeks class-action status, was filed Monday against San Francisco-based Wells Fargo in the U.S. District Court for the Northern District of California.

It is similar to a July 12 lawsuit against Calabasas-based Countrywide Financial Corp., the largest U.S. mortgage lender, in a Massachusetts federal court.

"A black applicant is almost five times more likely to get a high-rate loan than a white applicant at Wells," said Robert Rothman, a partner at Lerach Coughlin Stoia Geller Rudman & Robbins, which represents plaintiffs in both cases. "This is because of the discretionary pricing policy that results in loan officers adding points and fees to black borrowers."

Mortgage Direct Inc., an Elmhurst, Ill.-based mortgage broker, is also a defendant, court papers showed.

The lawsuit differs from those that target "predatory" lenders accused of charging excessive rates or fees on sub-prime home loans made to borrowers with weaker credit histories.

According to the complaint, the Jeffrieses 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.

Wells Fargo had no immediate comment on the suit.

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