A N.C. couple sued Wells Fargo and others after alleging an appraisal came up $52K short. Wells Fargo didn’t admit guilt or dispute the statistical findings.

WINSTON-SALEM, N.C. – Wells Fargo & Co. has agreed to an undisclosed settlement with a Black couple, who sued the bank over accusations they were deliberately low-balled by $52,000 on an appraisal for a mortgage refinancing application.

The lawsuit was filed on Sept. 13 in the Middle District of N.C. by Brigid and Joseph Washington of Raleigh.

The Washingtons claimed the defendants had violated the Fair Housing Act during the refinancing and appraisal process. They also made state law claims of fraud, unfair and deceptive trade practices, and civil conspiracy. The Washingtons claimed the defendants discriminated against them “by dramatically undervaluing their home in an appraisal because of plaintiffs’ race, notwithstanding that the home is located within Oberlin, an affluent, mostly white neighborhood.”

The settlement comes about 5½ months after Judge Catherine Eagles allowed in January certain federal Fair Housing Act and federal civil rights claims to proceed. A mediation conference was held July 12, a complete settlement was agreed upon July 17 and filed July 19.

The parties have until Aug. 31 to disclose details of the settlement. Besides the bank, defendants were Accurate Appraisal Service and licensed appraiser Bryan Klosterman.

“We are happy that we have resolved this matter, but have nothing further to add,” Wells Fargo said in a statement Tuesday.

In the complaint, the couple said they paid $440,000 in March 2018 for a 1,581-square-foot home with four bedrooms and two bathrooms. The couple said they spent $65,000 on home improvement projects that included the kitchen, window replacements, finishing the basement and buying new appliances.

In June 2020, the couple applied to refinance their loan to 15 years with the goals of obtaining a lower interest rate and ending the need for private mortgage insurance on the loan.

An appraisal typically is required by the lender for a refinancing. Before the appraisal was conducted, the complaint listed Wells Fargo as estimating the home’s market value at $525,000. However, the appraisal from Klosterman came in at $488,000.

According to the complaint, Klosterman’s appraisal didn’t rely on any comparable homes in the plaintiffs’ neighborhood, but rather on less expensive homes in another neighborhood. Brigid Washington said Klosterman spent about 10 minutes in-house on the appraisal, and he was “curt, abrupt and dismissive” to her.

The couple said Wells Fargo accepted Klosterman’s appraisal in evaluating the refinancing applications, then declined their requests for a new appraisal from a different appraiser.

The couple said that accepting Klosterman’s appraisal would’ve meant continuing to pay private mortgage insurance. They claimed they would have been required to pay higher refinancing mortgage loan fees and costs than non-minority borrowers.

The couple chose to apply with another lender, Movement Mortgage.

After the couple conducted what the complaint called a “whitewashing” – removing all family photos from the residence, not putting down a race on their application and having an older white friend be at the Movement Mortgage appraisal – the second appraisal came in at $540,000.

The couple said the defendants failed to take into consideration rapid increases in values in the Oberlin/Raleigh/Wake County markets over the two-year period.

Wells Fargo asked for the dismissal of the complaint, saying “these allegations and other generalized and conclusory allegations do not meet the law’s heightened pleading requirements necessary to support claims of racial discrimination in violation” of the federal statutes cited in the lawsuit.

In January, Eagles dismissed claims against Wells Fargo for fraud, civil conspiracy, and unjust enrichment, along with the Equal Credit Opportunity Act claim. She cited the Washingtons did not claim that the bank had rejected their refinancing application. The Washingtons were allowed to continue with their claims of racial discrimination under North Carolina consumer protection laws.

According to Bloomberg News, the Washingtons’ suit is part of a wave of litigation, including a consolidated class action in federal court in California, accusing Wells Fargo of discrimination in refinancing. A 2022 Bloomberg News investigation found that Wells Fargo rejected half its Black applicants during the mortgage refinancing boom.

Among major lenders, only Wells Fargo approved a smaller share of refinancing applications from Black homeowners in 2020 than a decade earlier, the report said. Nationwide, only 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of white homeowners, the report said.

Wells Fargo didn’t dispute Bloomberg’s statistical findings. It said it treats all potential borrowers the same but is more selective than other lenders.

© Copyright 2023, Winston-Salem Journal, Winston-Salem, NC

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Author: kerrys