| WASHINGTON, July 12
WASHINGTON, July 12 Wells Fargo & Co
agreed to pay $175 million to resolve allegations by the U.S.
Justice Department that it discriminated against qualified
African-American and Hispanic borrowers in its mortgage lending.
At the same time, the bank said it would stop making loans
through mortgage brokers, who the government said submitted
loans to Wells Fargo that had varied interest rates, fees and
costs based only on race and not correlated to the borrowers'
There are a lot of pieces to that, and borrowers -
especially those who are in the midst of getting new Wells Fargo
mortgages - may wonder what it means for them. Not all of the
answers are evident yet, but here are a few.
-- I'm in the middle of refinancing with Wells. Now what?
If you've already filed your application with a mortgage
broker, your loan should go through as planned. Wells said it
would stop taking new broker applications on Friday, July 13.
Mortgages already in the pipeline are expected to go through.
-- Will this make it harder to get a mortgage in the future?
Many experts, especially those who value the brokerage
process, say it will. Bank of America, Citi and
JPMorgan Chase have all stopped doing mortgage loans
through brokers, and the theory is that the fewer outlets
brokers have, the more business they will squeeze into fewer
"This is going to force the same amount of lending through
a smaller opening" says Rob Chrisman, a mortgage industry
analyst in San Rafael, California. "It will impact the borrower
in the form of higher rates or worse prices or a longer wait
time to get the loan."
But with mortgage interest rates flirting with historic
lows, getting a mortgage is already a slow and difficult process
and this won't make it worse, suggested Donald J. Frommeyer,
president of the National Association of Mortgage Brokers and an
Indianapolis mortgage broker. "Things have been tightening up
for the last 12 months."
Consumers can comparison shop for their own loans, either by
checking individual lenders or shopping through an aggregation
websites like HSH Associates () or Mortgage
Marvel (). But Chrisman pointed out
that individuals may not have the pull to fast track their
mortgages the way a broker handling large numbers of loans can.
-- I think I was one of the victims here. Will I get money,
Wells has agreed to pay $125 million to borrowers who paid
more for their loans than comparable white borrowers. A judge
must still approve the settlement. After that, money should flow
quickly, says Sam Garcia, publisher of Mortgage Daily, a trade
The government must name a settlement administrator within
60 days, provide that person with a list of borrowers due
settlement funds. At that point, the administrator will have six
months to complete all payments. Wells Fargo has already
provided the government with a list of potentially affected
borrowers (those who took out loans between 2004 and 2009). As
is typical in settlement cases, there will be a special website
and phone number set up, but it isn't ready yet.
-- I didn't borrow money yet, but I'd like to buy a house.
Is there anything here for me?
Wells is also paying $50 million to set up a Wells Fargo
Borrower Assistance Program of down payment help for borrowers
in areas that the Justice Department had highlighted as having
many discrimination victims. Those areas include Baltimore,
Chicago, Cleveland, Philadelphia, Oakland, San Francisco and
Washington, D.C. Those funds will be given out as forgiveable
loans maxing out at $15,000. Their interest rates will be 0
percent, and 20 percent of the loan will be forgiven every year,
explained Garcia. To qualify, borrowers have to earn less than
120 percent of the area median income, and they don't have to
use a Wells Fargo mortgage.
-- Am I getting a fair rate now?
In settling the complaints, Wells did not admit to any
prejudicial lending. But the Justice Department had alleged
African-American and Latino borrowers were being steered to
subprime mortgages carrying higher rates. One way to check your
rates is to get a copy of your credit score at the Fico web site
(). You'll learn whether you have an
excellent, mediocre, or subprime score. Then you can get
comparison quotes, based on your credit score, at many online
banks and brokers. Don't agree to any mortgage without
comparison shopping rates elsewhere.
The Stern Advice column appears weekly, and at additional
times as warranted. Linda Stern can be reached at
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