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Washington • Wells Fargo, the nation's largest originator of mortgages, agreed Thursday to pay more than $175 million to settle allegations that it engaged in a widespread pattern of discrimination that pushed qualified black and Latino borrowers into more expensive home loans.

The settlement with the U.S. Justice Department provides $125 million to borrowers who were steered into subprime mortgages or who paid higher rates than white borrowers because of their skin color or ethnicity and not because of their creditworthiness. Wells Fargo will also spend $50 million to help pay down payments to victims hardest hit.

It's the second-largest settlement of its kind in the Justice Department's history, and the total could grow as Wells Fargo conducts a review of its retail mortgage lending practices. Bank of America agreed to pay $335 million in December to resolve similar allegations against its Countrywide unit.

"Wells Fargo preyed on African-American and Hispanic borrowers and as a result, those borrowers have suffered significant financial harm," said U.S. Attorney Sally Quillian Yates, who represents the North Georgia district. "Today, the Department of Justice is endeavoring to right that wrong, and to put lenders on notice that they will be held accountable for discriminatory practices."

According to the federal complaint, Wells Fargo steered about 4,000 minority borrowers across the nation into subprime mortgages between 2004 and 2008, leading them to pay higher rates than white borrowers with similar credit profiles who received prime loans.

The complaint also contended that Wells Fargo charged about 30,000 black and Hispanic borrowers higher fees and rates than white borrowers because of their race or national origin rather than any objective reasoning.

Those dates correspond to the boom in subprime lending, where loans were given to the least creditworthy borrowers, often in the form of adjustable-rate mortgages that began with low teaser rates but later jumped to much higher rates, often to double digits. The change in rates greatly increased monthly payments for homeowners.

These loans were then pooled together by Wall Street investment banks into complex bonds, which were given top investment-grade ratings by complicit ratings agencies such as Moody's Investors Service and sold as safe bets to unsuspecting buyers. That house of cards fell apart in 2008 as homeowners began to default, taking down two giant banks, bringing about a housing crisis that exploded into a full-blown financial crisis and the deepest economic downturn since the Great Depression.

The complaint said Wells Fargo was aware the fees and interest rates it was charging discriminated against minority borrowers but that it failed to stop the predatory lending practices. An investigation by the department's Civil Rights Division found that independent mortgage brokers originating Wells Fargo loans charged higher fees and rates to minority borrowers across the country than they did to white borrowers who posed the same credit risk, according to a complaint released Thursday along with the proposed settlement.

Wells Fargo is admitting no wrongdoing as part of the complaint and proposed settlement, which focuses on lax rules that the bank set for brokers working through its "wholesale" mortgage business rather than on the practices of its own employees who made "retail" mortgages. The proposed consent decree, which is subject to approval by a U.S. District Court, says the bank maintains that it treated all its customers fairly and is settling the case to avoid litigation.

The settlement is important because it puts to rest a narrative spun in some conservative circles that the housing crisis was brought about by government-sponsored mortgage giants Fannie Mae and Freddie Mac, which forced banks to lend to minorities. The allegations raised by the Justice Department suggest minorities were sought out and put into higher-cost loans than similarly situated white borrowers.

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