Wells Fargo & Company recently announced it has reached a settlement agreement between Wells Fargo Bank, N.A. and the U.S. Department of Justice (DOJ). The agreement is supposed to resolve the DOJ’s prior claims that some Wells Fargo mortgages may have had a “disparate impact” on some African-American and Hispanic borrowers. The DOJ claims were based on a statistical survey of Wells Fargo Home Mortgage loans between 2004 and 2009, and the claims primarily relate to mortgages priced and sold to consumers by independent mortgage brokers. Wells Fargo denied the claims, but nevertheless agreed to pay $125 million to borrowers that the DOJ believes were adversely impacted by mortgages priced and sold by independent mortgage brokers through its wholesale channel. “Wells Fargo is 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,” said Mike Heid, president of Wells Fargo Home Mortgage.
Wells Fargo also announced that effective July 13, 2012 it will discontinue funding mortgages that are originated, priced and sold by independent mortgage brokers through its mortgage wholesale channel. The company stated that this wasn’t a requirement of the DOJ settlement, but rather is leaving wholesale on its own volition. After July 13, Wells Fargo will no longer accept new applications for loans originated by independent mortgage brokers through its wholesale channel, but will work to ensure existing applications are processed and closed.