The Justice Department is preparing a lawsuit against Wells Fargo for allegedly discriminatory lending practices that steered African American borrowers toward expensive, subprime loans during the housing bubble, the Huffington Post reported.
Wells Fargo, the nation’s largest home mortgage lender and the fourth-largest U.S. bank by assets, is currently seeking to settle the accusations in pre-lawsuit negotiations with the department, people with direct knowledge of the probe told the Huffington Post.
The Civil Rights Division’s Fair Lending Unit reportedly will handle the suit.
The bank also faces separate public actions involving similar allegations from the Federal Reserve and the city of Baltimore.
The Fed said last week that more than 10,000 borrowers were directed toward subprime mortgage loans or had loan documents falsified by banking personnel. Wells Fargo agreed to pay $85 million to settle civil charges and did not admit wrongdoing.
In the Baltimore case, the bank faces accusations of targeting black borrowers in a practice commonly called “reverse redlining.” The city alleges that the bank offered loans knowing borrowers would eventually default. But instead of shouldering the cost, the bank sold those loans to investors.
