Wells Fargo accused of racial discrimination in lending practices

Minority homeowners in Des Moines were three times more likely to receive high-cost subprime mortgage loans from Wells Fargo & Co. than white homeowners, according to research assembled by two watchdog organizations.

Des Moines-based Iowa Citizens for Community Improvement and Chicago-based National People’s Action have compiled data showing 46 percent of African-American and 35 percent of Latino homeowners in the Des Moines area that received a mortgage from Wells Fargo were given a high-cost, subprime loan. Only 20 percent of white borrowers were given these loans.

When only low- or moderate-income borrowers are factored in, African-American and Latino homeowners in Des Moines were four times as likely to receive a subprime loan as their white counterparts.

Similar numbers in other parts of the country have sparked legal action against Wells Fargo, which is not only the nation’s largest mortgage lender but is also the largest employer in Central Iowa, with more than 11,000 full-time employees in 2008.

So far, no legal action has been taken in Iowa.

The city of Baltimore sued the company last year claiming it engaged in a pattern of predatory lending practices in the city’s poorest neighborhoods, specifically targeting African-American neighborhoods for high-risk and unfairly priced loans.

The practice, known as reverse redlining, is prohibited under the federal Fair Housing Act.

Earlier this month, Illinois Attorney General Lisa Madigan filed a similar lawsuit against the company, claiming Wells Fargo specifically targeted heavily populated African American and Latino areas for high-cost loans, while whites with similar income levels received lower-cost loans.

Madigan’s lawsuit contends that Wells Fargo’s practices “transformed African-American and Latino neighborhoods into ground zero for subprime lending.”

The suit also claims some borrowers were led to believe that they were getting loans from Wells Fargo Home Mortgage, which is principally a prime lender, when in fact their loans were from a subprime unit, Wells Fargo Financial. Both of those entities are headquartered in the Des Moines metropolitan area.

Bob Brammer, a spokesman for Iowa Attorney General Tom Miller, said his office is monitoring Illinois’ lawsuit but has not taken any action so far on this particular issue.

Miller is no stranger to the subprime mortgage crisis. He was one of the main attorneys general in a lawsuit last year accusing Countrywide Financial Corp. of unfair and deceptive tactics in its loan-origination and servicing activities — and that borrowers often were put in structurally unfair and unaffordable loans.

The company eventually agreed to provide loan modifications to up to 397,000 borrowers nationwide.

Miller’s office also helped establish the “Iowa Mortgage Help” initiative, which set up a hotline and Web site to offer free counseling for homeowners in financial distress.

In a statement to the Iowa Independent, Wells Fargo said the allegations are a complete mischaracterization of the company’s lending practices.

“We have a long-standing commitment to fair and responsible lending,” the company said. “The policies, systems and controls we have in place ensure race is not a factor in the pricing or products we offer. Our controls are designed to ensure our lending is fair, responsible and nondiscriminatory. Our pricing is competitive and reflects the risk in the transaction including credit, loan type, loan-to-value ratio and property type. Prime pricing is made available to all borrowers who qualify.”