Opinion
SunTrust and Wells Fargo Settle Lawsuits
I
n separate actions, two of the
nation’s largest banks have
each agreed to multi-million
dollar settlements of mortgage
lending lawsuits that alleged wide-
spread discriminatory lending.
Wells Fargo, with $1.3 trillion in
assets, announced on May 29 that
it agreed to pay Shelby County,
Tenn. and its largest city, Mem-
phis, $7.5 million. Of these funds,
$4.5 million will be dedicated to
local programs that will be avail-
able later this year for down pay-
ment
assistance,
financial
education and home renovations.
Consumers purchasing a home in
either Memphis or Shelby County
may qualify for grants of up to
$15,000. This program will also
stipulate that prospective buyers
must agree to live in the homes for
at least five years. Tennesseans
seeking renovation assistance are
eligible even if their mortgage was
with another lender.
The remaining $3 million of the
settlement funds will support vari-
ous existing governmental pro-
grams focused on small business
development, public safety initia-
tives, financial counseling and
neighborhood revitalization. Over
the next five years, Wells has addi-
tionally pledged to lend $425 mil-
lion at market rates in the city and
county. Of this lending sum, $125
million will be allocated for low
and middle-income homebuyers.
The settlement will end the law-
suit filed in 2009 by the city and
county accusing the lender of Fair
Housing Act violations by deploy-
ing discriminatory mortgage lend-
R ESPONSIBLE
L ENDING
Charlene
Crowell
ing practices and unnecessary
foreclosures. The governments
further alleged that by targeting
African-American neighborhoods
was filed might not be the ones to
get the help. But as long as some-
body is helped…the community
still wins.”
By contrast, a recently negotiat-
ed settlement between the U.S.
Justice Department and SunTrust
Mortgage will directly benefit at
least 20,000 African-American
and Latino families in 34 states
and the District of Columbia.
These borrowers obtained Sun-
Trust mortgage loans between
2005 and 2009. Together, these
‘SunTrust’s African-American and Latino
borrowers had no idea they could
have gotten a better deal. No idea
that white borrowers with similar credit
would pay less. That is discrimination
with a smile’
for deceptive and high-cost mort-
gage loans as early as 2000, Wells
Fargo hurt city revenue collection
through lower property taxes, the
need for increased public safety
and housing code enforcement of
abandoned and deteriorated hous-
es.
Under the settlement, residents
whose homes were foreclosed by
Wells Fargo will not be directly
compensated. Memphis Mayor A.
C. Wharton told the Memphis
Commercial Appeal, “Many times
when lawsuits are filed the per-
sons on whose behalf the lawsuit
borrowers will share in a $21 mil-
lion settlement of mortgage dis-
crimination claims.
The
DOJ’s
investigation
stemmed from a referral from the
Federal Reserve Board. SunTrust
Mortgage, the nation’s 11th largest
commercial bank, was alleged to
have
discriminated
against
African-American and Hispanic
borrowers in pricing their mort-
gage loans. These borrowers also
qualified for loans with pricing set
by SunTrust’s objective criteria.
After reviewing documents and
data covering more than 850,000
residential
mortgage
loans
between 2005 and 2009, the
DOJ’s conclusion was that minor-
ity borrowers had been over-
charged
because
SunTrust
Mortgage allowed its loan officers
and mortgage brokers the discre-
tion to change a loan’s pricing.
The bank encouraged this discrim-
inatory practice by sharing the
inflated charges with retail loan
officers and mortgage brokers.
SunTrust did not require its
employees or agents to justify or
document the reasons for many of
the pricing adjustments not based
on borrower risk. The lender also
failed to adequately monitor for
and fully remedy the effects of
racial disparities in these pricing
adjustments.
As Assistant Attorney General
Thomas Perez observed, “If you
were African-American or Latino,
you likely paid more for a Sun-
Trust loan than a similarly-quali-
fied white borrower simply
because of your skin color. You
paid what amounted to a racial
surtax that ranged from hundreds
to thousands of dollars.”
Perez
added,
“SunTrust’s
African-American and Latino bor-
rowers had no idea they could
have gotten a better deal. No idea
that white borrowers with similar
credit would pay less. That is dis-
crimination with a smile.”
Agreeing with Perez, Federal
Reserve Board Governor Eliza-
beth A. Duke said, “Racial or
other illegal discrimination has no
place in our credit markets. We are
pleased that this settlement is
designed to ensure fair access to
credit.”
Duke is probably not the only
one pleased. The consumers who
lost hundreds or even thousands of
dollars on these mortgage mark-
ups are likely the most pleased.
They got a measure of justice and
will be comforted with some cash
compensation.
The real tragedy in all of these
discriminatory lawsuits is that
they have occurred long after fed-
eral laws were enacted to protect
and prevent people of color from
suffering these kinds of injustices.
We may have won out civil rights;
but we still have a long journey
towards silver rights.
Charlene Crowell is a communi-
cations manager with the Center
for Responsible Lending.
June 20, 2012 The Portland Skanner Page 5