: Lawsuit alleges Wells Fargo discriminated in mortgage refi business
Wells Fargo & Co. mortgage holder Aaron Braxton, an African American actor and teacher with a master’s degree from University of Southern California, wanted to refinance his mortgage during the historically low interest rates of 2019.
Braxton offered a good credit score and a track record of paying his mortgage bills on time for many years to Wells Fargo & Co.
But it took him more than nine months to refinance his mortgage and he ended up at an above-market rate of 4%, after the bank allegedly obstructed his ability to complete the deal.
Braxton on Friday filed a class action discrimination lawsuit in federal court in the Northern District of California that charges Wells Fargo with violating the Equal Credit Opportunity Act, the Fair Housing Act of 1968 and California’s Unruh Civil Rights Act. Federal Magistrate Judge Kandis A. Westmore has been assigned the case.
The lawsuit seeks a jury trial and a yet-to-be determined amount in compensation for Black Americans “who have been victimized by Wells Fargo’s intentional, knowing and systematic race discrimination, violating the contractual, commercial and civil rights of… members and causing millions (and perhaps even billions) of dollars in damages,” according to the complaint.
Los Angles-based law firm Ellis George Cipollone O’Brien Annaguey LLP filed the lawsuit on behalf of plaintiff Braxton and said the amount in controversy exceeds $5 million.
A Wells Fargo spokesperson did not comment on the lawsuit.
Wells Fargo helped more Black homeowners refinance their mortgage than any of the other largest banks and the bank remains confident that it applies consistent underwriting practices regardless of the person’s race or ethnicity, a bank spokesperson said.
“Our analysis shows that additional, legitimate, credit-related factors that are not available in Home Mortgage Disclosure Act data were responsible for the differences in our refinance approval rate for black homeowners,” the bank said.
Wells Fargo was the only bank out of 12 major lenders in the U.S. that approved a smaller share of refinancing applications from Black homeowners in 2020 than it had in 2010, the lawsuit said.
The lawsuit cited a March 11 Bloomberg report that revealed that Wells Fargo approved 47% of Black homeowner refinancing applications in 2020, compared to 72% for white applicants, 67% for Asian applicants and 53% of Hispanic applicants.
The lawyer for the plaintiff, Dennis S. Ellis, said the statistical difference between Wells Fargo’s approval rate and other banks is dramatic.
“There’s clearly a problem here,” Ellis told MarketWatch. “I don’t think you can eliminate the human element from this. Either Wells Fargo saw those numbers and ignored whatever processes or electronic initial inputs it had, or the underwriters themselves placed a level of importance on race-specific issues, or race-related issues.”
The lawsuit estimates as many as 13,000 potential participants in the class-action suit including all Black people in the U.S. who submitted a Wells Fargo home refinance application since Jan. 1, 2018 that were processed slower than the average time, got their applications denied, or those with loans made at a higher interest rate compared to “similarly situated” non-Black applicants.
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The issue of discrimination has come up before at Wells Fargo.
In 2012, the bank agreed to pay a $184 million settlement on federal claims it discriminated against Black and Hispanic homeowners by steering them into subprime mortgages.
Meanwhile, the Consumer Financial Protection Bureau has been focusing on hunting down instances of redlining by financial institutions.
Shares of Wells Fargo are up 7.2% so far in 2022, compared to a loss of 6.2% by the S&P 500
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