Wells Fargo Fined $85 Million for Mortgage Abuses, Discrimination Lawsuit Awaits

Well, it just keeps getting worse for our favorite neighborhood lender Wells Fargo.  Maybe we should just start calling them “Fargo,” as in the Coen brothers’ movie.  If you haven’t seen it, suffice it to say it’s a dark comedy…with much more darkness than comedy.

According to a statement issued by the Federal Reserve, Wells Fargo was fined $85 million in “the first formal enforcement action taken by a federal bank regulatory agency to address alleged steering of borrowers into high-cost, subprime loans.”

According to Wells chairman and CEO John Stumpf, “The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo.”

Sixteen former Wells sales staffers are now banned from working in the banking industry.  Only 16?

The Fed places the blame on sales staff who allegedly “steered borrowers who were potentially eligible for prime interest rate loans into loans at higher, subprime interest rates, resulting in greater costs to borrowers.”

Additionally, the Fed claimed that Wells sales staff “falsified information about borrowers’ incomes to make it appear that the borrowers qualified for loans when they would not have qualified based on their actual incomes.”

The Fed statement goes on to say that these allegations arose from the company’s “incentive compensation and sales quota programs and the lack of adequate controls to manage the risks resulting from these programs.”

The full story is available here from the USA Today.

Of course, any time I read something like this about a major bank, I am usually shocked at the pittance involved…$85 million?  That’s a drop in the bucket for a lender of this size.  How will that amount of money correct the havoc wreaked on the housing industry and the economy by such unethical lending practices?  Wouldn’t we be better served if Wells would agree to cooperate with short sales, loan modifications, and the like?  At least that would benefit the people who were victims of Wells lending…the BORROWERS!

But maybe the next step of litigation against Wells will result in something more.  According to The Huffington Post, Wells is about to be sued by the Justice Department

“for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.”

Wells is already embroiled in a similar suit with the city of Baltimore for “reverse redlining.”  According to the article, Wells is accused of using those same lending practices against black borrowers in mostly-black neighborhoods.  The city of Baltimore claims Wells did this deliberately, knowing the borrowers would eventually default on loans that Wells would have already sold to investors. Wells denies the charges.

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