The settlement covers borrowers who obtained mortgages through brokers, rather than directly from the bank. Wells Fargo agreed to conduct an internal review of its retail lending and compensate African-American and Hispanic borrowers who were placed into subprime loans when similarly qualified white borrowers received prime loans, which offer better rates.
Payments to any retail borrowers identified in the review process will be in addition to the $125 million to compensate borrowers who were victims of discrimination, the federal government said.
Perez, a former Montgomery County councilman, said he believed some Baltimore residents would qualify for payments under this review as well.
Baltimore first filed suit against the bank in 2008 but was forced to refile three times after Wells Fargo won a series of court victories. The fourth version of the city's lawsuit was filed in 2010 and identified more than 250 properties as blighted houses that fell into disrepair because of unnecessary foreclosures that resulted from dishonest loans. At the time, Nilson said the value of damages sought by the city would approach $20 million.
Under the terms of the deal, Baltimore's suit against Wells Fargo will be dismissed.
Perez said the settlement of the federal suit, which also includes payouts to Washington, Chicago, Philadelphia, San Francisco, New York, Cleveland and Riverside, Calif. —all hit hard by the foreclosure crisis — recognizes that foreclosures hurt communities as well as individuals.
"It all started here in Baltimore City," Perez said. "The lawsuit filed by Baltimore City in 2008 was the catalytic force, plain and simple. When you filed this lawsuit to call attention to the devastating consequences of this crisis, you got the attention of the federal government and you got the attention of the nation."
Highlights of settlement
• $125 million in payments to borrowers, of which $2.5 million is expected to go to Baltimore
• $50 million for help toward down payments to encourage home-buying, including $4.5 million for Baltimore
• $425 million in mortgage-lending in the city as part of a five-year goal
• $3 million to Baltimore for other foreclosure-related initiatives