Wells Fargo reaches deal in Memphis bias suit, to pay $7.5M
NEW YORK — Wells Fargo & Co. (WFC) said Tuesday it will pay $7.5 million to the city of Memphis and Shelby County, Tenn., and the city and county have agreed to drop a foreclosure-related lawsuit against the nation's largest mortgage lender.
The payment will be used to aid homeowners and the local economy.
The San Francisco company said it will provide Memphis and Shelby County with $4.5 million in grants for mortgage down payments and home renovations for applicants whose incomes meet certain thresholds. Wells Fargo will also supply $3 million to improve the local economy and fund financial-literacy programs. The bank also said it aims to make $425 million in mortgages there over five years.
"The condition of the local housing market continues to challenge Memphis and Shelby County significantly, as unoccupied homes and excessive housing inventory weigh heavily on communities," Memphis Mayor A.C. Wharton Jr. said in a press release.
Shelby County Mayor Mark Luttrell said, "we're glad that Wells Fargo decided to engage in a dialogue that led to this collaboration."
The bank has been under fire for years, as borrowers complained about discrimination and botched foreclosures. In November, an Illinois state court judge ruled the state can move forward with a lawsuit alleging that Wells Fargo steered minority borrowers into risky mortgages at the height of the housing bubble.
Government agencies are investigating mortgage-lending practices at Wells Fargo, including potential violations of fair-lending laws, the bank disclosed in its quarterly earnings filing with the Securities and Exchange Commission. The Department of Justice believes "it can bring claims against Wells Fargo for monetary damages and civil penalties under fair lending laws," the bank said, but it added it believes "such claims should not be brought."
In 2010, the city of Memphis and Shelby County sued Wells Fargo in federal court in Tennessee for unspecified damages, claiming the bank foreclosed in predominantly African-American neighborhoods much more often than in white neighborhoods. "Wells Fargo's disproportionately high foreclosure rate in Memphis' and Shelby County's African-American neighborhoods is the result of reverse redlining," the plaintiffs alleged.
Wells Fargo denies the allegation.
Leigh Collier, Wells Fargo regional president for the Mid-South, said in a press release the bank "agreed that it was in the best interests of everyone involved to work together rather than to continue to be involved in a protracted legal fight."
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