Wells Fargo, the largest U.S. mortgage lender, has agreed to pay more than $175 million to settle allegations of discrimination, the Justice Department said.
Federal prosecutors alleged Wells Fargo engaged in a pattern of discrimination against qualified African-American and Hispanic borrowers from 2004 through 2009.
The settlement provides $125 million in compensation for approximately 4,000 wholesale borrowers who were steered into subprime mortgages and 30,000 wholesale borrowers who paid higher fees and rates than white borrowers because of their race or national origin, the department said. The bank will also provide $50 million in direct down payment assistance to borrowers in communities where the Justice Department identified large numbers of discrimination victims and which were hard hit by the housing crisis.
Wells Fargo has also agreed to conduct an internal review of its retail mortgage lending and will compensate African-American and Hispanic retail borrowers who were placed into subprime loans when similarly qualified white retail borrowers received prime loans.
"The department's action makes clear that we will hold financial institutions accountable, including some of the nation's largest, for lending discrimination," Deputy Attorney General James M. Cole said. "An applicant's creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for."
The settlement was filed Thursday in federal court in Washington.