Illinois Attorney General Lisa Madigan filed a lawsuit Friday against Wells Fargo & Co., alleging that one of the nation's top mortgage lenders illegally discriminated against minority borrowers.
In the suit, filed Friday in Cook County Circuit Court, Ms. Madigan alleged that Wells Fargo disproportionately sold African-American and Hispanic borrowers high-cost, subprime mortgages, while white borrowers with similar incomes received mortgages with more favorable terms.
Ms. Madigan alleged that Wells Fargo illegally conducted "reverse redlining," specifically targeting minority neighborhoods for abusive loans.
"I'm talking of the worst of the worst bad loans that were sold in the run-up to the collapse of the housing market," the attorney general said in a press conference Friday.
In a statement, Wells Fargo said race isn't a factor in its lending decisions and called the lawsuit a "complete mischaracterization" of its practices.
The suit cited data analyzed by the Chicago Reporter, a bimonthly magazine, that showed Wells Fargo in 2007 sold high-cost, subprime loans more often to its highest-income African-American borrowers in the Chicago area than to its lowest-income white borrowers. In that year, about 34% of African-American customers earning $120,000 or more received high-cost mortgages from the lender, compared with less than 22% of white borrowers who earned less than $40,000, according to the magazine.
Ms. Madigan said the lawsuit resulted from an investigation into possible violations of fair-lending and consumer-fraud laws. The suit seeks civil penalties against Wells Fargo and a court order ending the alleged illegal activities.
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