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), 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, 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.
The lawsuit differs from those that target "predatory" lenders accused of charging excessive rates or fees on "subprime" home loans made to borrowers with weaker credit histories.
According to the complaint, the Jeffries 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.
Shares of Wells Fargo were down 41 cents to $34.20 in afternoon trading on the New York Stock Exchange.
((Editing by Toni Reinhold; Reuters Messaging: jon.stempel.reuters.com@reuters.net; +1 646 223 6317)) Keywords: WELLSFARGO DISCRIMINATION/LAWSUIT
(C) Reuters 2007. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nN31251892
