Wells Fargo sued for racial bias in mortgage loans

By Jonathan Stempel

NEW YORK, July 31 (Reuters) - Two black homeowners have sued Wells Fargo & Co (WFC.N: Quote, Profile, Research), 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 more well-defined criteria such as credit histories and home values. The southwest Chicago homeowners said this violates the federal Fair Housing Act and Equal Credit Opportunity Act.

The lawsuit seeks class-action status, and was filed on 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 Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the largest U.S. mortgage lender, in a Massachusetts federal court. Countrywide is based in Calabasas, California.

"A black applicant is almost five times more likely to get a high-rate loan than a white applicant at Wells," Robert Rothman, a partner at Lerach Coughlin Stoia Geller Rudman & Robbins LLP, which represents plaintiffs in both cases, said in an interview.

"This is because of the discretionary pricing policy that results in loan officers adding points and fees to black borrowers."

Wells Fargo, also the fifth-largest U.S. bank, was not available to comment. Mortgage Direct Inc, an Elmhurst, Illinois mortgage broker, is also a defendant, court papers showed.