Wells Fargo Settles Mortgage Discrimination Suit With $100M Fund To Help Low-Income Homebuyers

Low- and moderate-income homebuyers from 50 cities will be eligible for new mortgage assistance programs after Wells Fargo & Co. settled a lawsuit alleging discriminatory hiring and lending practices.

A judge in California district court approved a final settlement May 15 in a lawsuit against Wells Fargo's board by several of its shareholders. It follows a four-year dispute alleging the company's board failed to maintain adequate oversight of its lending practices.

Wells Fargo did not admit any wrongdoing as part of the settlement. However, the bank will establish a $100 million, three-year mortgage assistance borrowers program for communities with barriers to obtaining a mortgage. The directors must also pay $10 million to shareholders, whom it will notify.

The program "represents a meaningful step toward expanding equitable access to financial
services," Judge Trina Thompson wrote. "For many individuals and communities historically excluded from traditional lending pathways, this program signals a shift toward more inclusive underwriting practices and a deeper recognition of systemic barriers."

"We are pleased to have reached a settlement," Wells Fargo said in a statement to Realtor.com®. The bank denies the allegations in the suit, but settled to avoid continued cost and disruption of further litigation, according to court documents.

'The culture at the root'

The settlement ends years of litigation, brought by a series of Wells Fargo shareholders, employees and job applicants. Those cases were consolidated into one lawsuit in the US District Court for the Northern District of California in 2024.

The shareholders accused the board of not having proper oversight of its lending and hiring practices, accusing the company of "widespread and systematic discrimination in lending," according to the complaint.

Instead, the plaintiffs said they brought concerns to Wells Fargo about discriminatory lending practices and problems in its lending algorithms that shut out minority mortgage applicants.

They cited analysis from Bloomberg that showed Wells Fargo was the only major lender in 2020 to reject more refinancing from Black homeowners than it accepted. And a private investigator spoke to former employees who they said reinforced that allegation.

"It’s the culture at the root of the company," one employee told the plaintiffs' private investigator, according to the complaint.

The board failed to act on those claims, according to the complaint.

And, they also claimed the company's public statements about diverse hiring initiatives were merely to mollify shareholders and the company didn't follow through.

The lawsuit is a shareholder derivative action. In other words, company shareholders sued to accuse company directors and officers of breaching their fiduciary duty. The plaintiffs alleged that exposed the company to scrutiny and civil and criminal investigations.

Motley Rice LLC, Cotchett Pitre & McCarthy LLP, and Bleichmar Fonti & Auld LLP were counsel for the plaintiffs in the suit. They will received $27.5 million in legal fees, separate from the fund. Sullivan & Cromwell LLP represented Wells Fargo's board.

"The settlement represents meaningful progress in addressing discrimination by implementing a program that provides real support to individuals who have historically faced financial discrimination and have lacked access to programs of this kind," Tyson Redenbarger, a partner at Cotchett, Pitre & McCarthy, said.

What cities will benefit from the fund?

Wells Fargo's $100 million borrower assistance fund will provide mortgage assistance to low- and moderate-income borrowers in certain census tracts. It will also have closing cost assistance for low- and moderate income houses.

Both programs are going to be available in these metropolitan areas and regions: Allentown's New Jersey counties; Anahei, CA; Arlington, VA; Atlanta; Atlantic City, NJ; Austin, TX; Baltimore; Bridgeport, CT; Camden, NJ; Charlotte, NC; Chicago; Dallas; Denver; Fort Lauderdale, FL; Fort Worth, TX; Jacksonville, FL; Lakewood, NJ; Los Angeles; Marietta, GA; Miami; Minneapolis-St. Paul; Montgomery County, Pennsylvania; Nassau County, NY; New York, NY ; Newark, NJ; Oakland, CA; Orlando, FL; Philadelphia; Phoenix; Portland, OR; Raleigh, NC; Richmond, VA; Riverside, CA; Sacramento, CA; San Diego; San Francisco; San Jose, CA; Seattle; Tampa, FL; Trenton-Princeton, NJ; Vineland, NJ; Washington, DC; West Palm Beach, FL; and Wilmington, DE.

And, the closing cost program will be available in another seven areas: Albuquerque, NM; Cape Coral, FL; Columbia, SC; Houston; Las Vegas; Oxnard-Thousand Oaks, CA; and Salt Lake City.