The U.S. Department of Housing and Urban Development (HUD) has reached a $5 million settlement with Wells Fargo Home Mortgage, the largest provider of residential mortgage loans in the nation, to resolve allegations that Wells Fargo discriminated against women who were either pregnant or on maternity leave, HUD announced Thursday.
HUD reported that 190 discrimination complaints related to maternity leave have been filed since 2010, which had resulted in 40 settlements for a combined total of about $1.5 million prior to Thursday's settlement. The complainants say their respective lenders are in violation of the Fair Housing Act, which makes it illegal to discriminate based on race, color, national origin, religion, sex, disability, or familial status for any real estate transaction.
The complaints covered in Thursday's settlement were filed by six families from five states (Nevada, Nebraska, Texas, Arizona, and California). As part of the settlement, Wells Fargo agreed to distribute $165,000 to the six families and create a fund with at least $3.5 million to compensate other Wells Fargo applicants who claim to have experienced maternity leave-related discrimination at the time they applied for a loan. Wells Fargo also agreed to pay up to 175 claimants $20,000 each; if there are more than 175 claimants, Wells Fargo will replenish the fund with $1.5 million and pay the next 75 claimants $20,000 each. If there are more than 250 claimants, claimants after 250 will receive a pro-rated share of the $5 million.
"The settlement is significant for the six families who had the courage to file complaints, and for countless other families who will no longer fear losing out on a home simply because they are expecting a baby," said HUD Secretary Julián Castro said. "I’m committed to leveling the playing field for all families when it comes to mortgage lending. These types of settlements get us closer to ensuring that no qualified family will be singled out for discrimination."
Wells Fargo will also change its underwriting policies to ensure they are not discriminatory as part of the settlement. The lender agreed to implement new Temporary Leave Guidelines and issue instructions to their staff on how to implement them. Also as part of the settlement, Wells Fargo did not admit to any violation of the Fair Housing Act.
The six complaints allege that Wells Fargo made loans unavailable to families based on familial status, forced women to give up their maternity leave and return to work before their loans closed, and made discriminatory statements toward women applicants who were either pregnant or had recently given birth.
"We resolved these claims to avoid a lengthy legal dispute so we can continue to serve the needs of our customers," Wells Fargo spokesman Tom Goyda said. "Our underwriting is consistent with longstanding fair and responsible lending practices and our policies do not require that applicants on temporary leave return to work before being approved. HUD found no violation of the Fair Housing Act or any other law by Wells Fargo. The agreement resolves claims related to only five loan applications from a period when Wells Fargo processed a total of approximately 3 million applications from female customers."
Several lenders have settled with HUD over maternity leave-based discrimination complaints since 2010. In November 2013, Bank of America settled with HUD for $45,000 to resolve such complaints, and Cornerstone Bank settled for $750,000 in 2011, according to HUD.