por Luis Carlos López
Hispanic Link News Service
Now that Wells Fargo has taken steps to protect Hispanic and African-American homebuyers and ceased financing mortgages through independent brokers, things may be looking up for both groups.
The behemoth banking institution agreed July 12 to a $175 million discrimination suit settlement with the U.S. Department of Justice. DOJ investigators found that during the housing boom of the last decade, Wells Fargo’s independent brokers discriminated against Hispanics and blacks.
The settlement offers compensation both to borrowers who were steered into subprime mortgages and who paid higher fees and rates than white borrowers because of their race or national origin. Details as to criteria such as when and how much have yet to be established.
“Wells Fargo will also provide $50 million in direct down payment assistance to borrowers in communities around the country where the department identified large numbers of discrimination victims and who were hard-hit by the housing crisis,” the Justice Department stated.
Responding to inquiries by Hispanic Link News Service following the agreement, DOJ spokesperson confirmed that from 2004 to 2009, nearly half of the 30,000 borrowers who had been charged higher fees were Hispanic.
Approximately 4,000 African-American and Hispanic borrowers who were qualified borrowers were steered to subprime loans. With the settlement, they will receive an average of approximately $15,000, a DOJ official said.
Some 30,000 of those borrowers were also charged higher fees and rates than non-Hispanic white borrowers. They are expected to receive an average of approximately $2,000.
National Association of Hispanic Real Estate Professionals acting director Gary Acosta said these practices happened far too often in Latino communities. He said Wells Fargo’s decision to discontinue contracting with independent mortgage brokers, whom he described as middlemen, on loans and exiting the wholesale business altogether was “a significant development.”
“Most Hispanics are relatively inexperienced in the home buying process,” Acosta, co-founder of NAHREP, a non-profit trade association based in San Diego, He mentioned that for four out of five Hispanic homebuyers, such a purchase is a new experience and many aren’t educated in financial literacy, leaving the door open to predatory lending.
Court documents show that Wells Fargo’s discriminatory practices occurred in 82 geographic markets across at least 36 states and the District of Columbia.
Some 3,500 were in the Washington, D.C.-Arlington-Alexandria metropolitan area with another 1,000 reported in the nearby Baltimore area. In addition, 4,500 victims were from the Los Angeles, 4,100 from Miami, 4,000 from New York, 3,200 from Chicago and 2,100 from San Francisco.
Other United States cities mentioned in the DOJ lawsuit against Wells Fargo include: Atlanta (1,400), Riverside, Calif. (1,300), Houston (1,170) and Philadelphia (1,030).
Now that Wells Fargo has agreed to stop financing such loans, noting that it quit making subprime loans in 2008, Acosta says Hispanics will likely lift the housing market from its current dismal economic performance.
A March 2012 NAHREP report, “State of Hispanic Homeownership,” predicted that Hispanics are expected to account for 40 percent of the estimated 12 million net new households, with people of color comprising 70 percent of total growth in the next decade. “Without this population surge, the economic development of key regions in the U.S. would have been stunted,” the report said.
“We want to let the public know of the Hispanic home buying power,” Alejandro Becerra, NAHREP research director, said when the report was released
In response to the settlement, Wells Fargo Home Mortgage president Mike Heid said the bank would be “settling this matter because we believe it is in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight and to instead devote our resources to continuing to contribute to the country’s housing recovery.”
Alfredo Padilla, another Wells Fargo spokesman, told Hispanic Link that the bank would no longer fund mortgages that are originated, priced and sold by independent mortgage brokers through its mortgage wholesale channel.
“Mortgages sold by independent brokers in this manner currently represent five percent of the company’s home mortgage funded volume. Mortgage brokers operate as independent businesses and are not employed by Wells Fargo,” he stressed.
(Luis Carlos López is a contributing columnist with Hispanic Link News Service. Email him at lclopez@gmail.com)
