Back in 2017, the city of Philadelphia sued Wells Fargo, claiming the bank engaged in discriminatory lending by steering minority borrowers into riskier or more expensive mortgages than they should have gotten.
The bank vociferously denied the city’s “unsubstantiated accusations” and claimed it would “vigorously defend” itself against the allegations, but 18 months later, the bank is settling with the city.
Wells Fargo and the city of Philadelphia announced Monday that they’d reached a settlement that will bring the city’s lawsuit against the lender to an end.
Under the terms of the settlement, Wells Fargo will provide $10 million for “sustainable housing-related programs to promote and preserve homeownership for low- and moderate-income residents” of Philadelphia.
The settlement will end the city’s lawsuit against Wells Fargo.
In its lawsuit, the city accused Wells Fargo of “steering African-American and Latino borrowers towards high-cost or high-risk loans even where those borrowers’ credit permitted them to obtain more advantageous loans.”
Philadelphia’s complaint also alleged that Wells Fargo was “aware and, in fact, incentivized the marketing of the high-cost or high-risk loans to minorities.”
In the lawsuit, the city claimed that an analysis found that 23.3% of loans Wells Fargo made to minority customers in Philadelphia were “high-cost or high-risk,” while only 7.6% of loans made to white customers were “high-cost or high-risk.”
Throughout the lawsuit, Wells Fargo denied the allegations and held to its position that the claims were without merit.
And while Wells Fargo still holds that position, claiming Monday that does not admit liability and “vigorously” denies the allegations, the bank is choosing to settle nonetheless.
“We’re pleased that we’ve been able to resolve this matter in a way that will provide real, tangible sustainable homeownership opportunities for many low- and moderate-income residents of Philadelphia,” said Joe Kirk, Wells Fargo Region Bank president, Greater Philadelphia.
According to the parties, most of the money – $8.5 million to be exact – will go to “provide grants for down payment and closing cost assistance to low- and moderate-income persons and households” to help people buy homes in Philadelphia.
The Philadelphia Housing Development Corporation will provide the grants and there is no requirement that the buyer use Wells Fargo as their mortgage lender in order to receive the grants.
Beyond that, $1 million will be divided up to as many as three nonprofits to implement the Philadelphia’s Residential Mortgage Foreclosure Prevention Program.
According to the city, the program was developed after the 2008 financial crisis as a way to mitigate the effects of the foreclosure proceedings on homeowners, lenders, and the city.
The settlement also stipulates that Wells Fargo provides $500,000 in grants to the city’s land care program, which is aimed at revitalizing vacant land including abandoned residential lots in Philadelphia.
Wells Fargo and the city of Philadelphia will also collaborate on a program called “Understanding Philadelphia.” The program, for Wells Fargo mortgage employees in Philadelphia, will analyze the history of the housing market in the city, the city’s neighborhoods, and the current housing needs of city residents.
“Homeownership brings stability, security and pride — in yourself, and in your community. Philadelphians who struggle amid poverty need assurance that they face a level playing field as they work to achieve that dream,” Philadelphia Mayor Jim Kenney said in a statement.
“This agreement brings substantial support to the very communities that most need this assistance. Philadelphia is committed to ensuring that no one faces additional hurdles toward homeownership because of their race or ethnicity,” Kenney added.
“From the outset of this litigation, our focus has been on directing relief to the neighborhoods that were the subject of the litigation, which were communities of color that continue to face challenges,” Philadelphia City Solicitor Marcel Pratt said.
“The resolution will provide much-needed benefits to the City’s low- and moderate-income residents—most significantly by enabling homeownership, which is one of the most effective ways that families accumulate wealth in America,” Pratt continued.
“One of the advantages of this resolution is that we secured valuable benefits that would not have been available through pursuing our litigation for City government’s injuries under the Fair Housing Act,” Pratt concluded. “As a result, we are providing tangible, significant benefits directly to our communities and residents.”