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Wells Fargo’s deal with Justice Dept. grows after review

Residents of Baltimore and seven other cities will share an extra $60 million in compensation from Wells Fargo Bank N.A., according to a document filed Wednesday in the Justice Department’s civil lawsuit against the lender.

Baltimore City Solicitor George Nilson

The money stems from an internal review Wells Fargo agreed to undertake as part of the historic $125 million settlement it reached with the government in July.

That review found nearly 4,000 buyers who could have qualified for better loans than the subprime deals they were offered, at an average savings of about $14,850 each, according to Wednesday’s filing in U.S. District Court in Washington, D.C.

Wells Fargo deposited $59.25 million into an escrow-bearing account on Dec. 13 and provided written verification of the deposit to the government, the filing said.

Baltimore City Solicitor George Nilson said the Justice Department’s underlying case came about because of litigation brought by the city, accusing the nation’s largest mortgage lender of targeting Baltimore residents who lived in predominantly African-American neighborhoods for subprime loans.

“We sued because of the bad things that were happening to individuals,” Nilson said Wednesday in a telephone interview.

Wells Fargo settled the city’s lawsuit on July 12 for about $7 million, Nilson said. Of that, $3 million will be discretionary money the city can use to assist borrowers.

On that same day, the Justice Department entered into its $125 million settlement. Wells Fargo also agreed to set up a $50 million down-payment assistance fund for minority borrowers in Baltimore and seven other cities where the department said it has identified a high numbers of victims of discrimination.

The other cities are Washington, New York, Philadelphia, Chicago, Cleveland, Oakland, Calif., and Riverside, Calif. That settlement was approved in September.

Assistant Attorney General Thomas E. Perez said in July that Baltimore’s lawsuit “got the ball rolling” for the federal investigation.

Perez, who is head of the Justice Department’s Civil Rights Division, said the city’s litigation, which was brought by Relman, Dane & Colfax PLLC, a Washington law firm, “was the catalytic force.”

“You got the attention of the federal government,” he said.

Wednesday’s payout was in addition to the previous settlement.

Tom Goyoda, a spokesman for Wells Fargo, said in a telephone interview that the $60 million compensation will go directly to individual borrowers, not to the city.

In the underlying suit, the government alleged that African-American and Hispanic borrowers paid more than non-Hispanic white borrowers based on their race or national origin.

Wells Fargo, which controls roughly a third of the home loan market, disputed those allegations, but agreed to settle in order to avoid contested litigation and to instead “devote its resources to continue to provide fair credit services and choices to eligible consumers, and important and meaningful assistance to borrowers in distressed U.S. real-estate markets.”

The case is U.S. v. Wells Fargo Bank N.A., 12-cv-01150, U.S. District Court, Washington, D.C.