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May 10, 2012

Wells Fargo logo
Wells Fargo logo

Wells Fargo Could Face Federal Lawsuit Over Fair-Lending Issues

Wells Fargo & Co. disclosed on Tuesday in a United States Securities Exchange Commission (SEC) filing that it faces possible civil penalties and monetary damages for alleged violations of fair-lending laws.

“The Department of Justice has advised Wells Fargo that it believes it can bring claims against Wells Fargo for monetary damages and civil penalties under fair-lending laws,” Wells Fargo said in its SEC filing. “We believe such claims should not be bought and continue seeking to demonstrate to the Department of Justice our compliance with fair-lending laws.”

The two areas of concern are:

    Whether Wells Fargo may have violated fair-lending laws or other laws and regulations, relative to mortgage origination practices;

    Whether Wells Fargo properly disclosed in offering documents for its residential mortgage-backed securities the facts and risks associated with those securities.

In a 2009 federal lawsuit, black homeowners in Baltimore charged that Wells Fargo employees steered them into high-interest, subprime mortgages and did not provide home buyers with loan options.

In 2010, the City of Memphis, Tenn., sued Wells Fargo, charging that bank officials steered blacks into applying for high-interest, subprime mortgages, which caused many African Americans to lose their homes when mortgage-interest rates reset to amounts homeowners could not afford.

Wells Fargo also was one of five banks that agreed to pay a $25 billion settlement relative to mortgage-loan servicing and mortgage-foreclosure abuses.

Wells Fargo, which is based in San Francisco, is the largest servicer and originator of home loans in the country.

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