WASHINGTON (Reuters)—Wells Fargo & Co. has agreed to pay $125 million to settle an investigation by the U.S. Justice Department into whether it discriminated on the basis of race and national origin in its mortgage lending, according to court documents filed on Thursday.

The settlement, which needs approval from a judge, would end the investigation into whether the fourth largest U.S. bank between 2004 and 2009 knowingly targeted minorities for risky mortgages that came with higher costs, according to documents filed in the U.S. District Court for the District of Columbia.

Wells Fargo in May said it could face civil charges under laws that prohibit discrimination against minority homebuyers. At the time, the lender said in a securities filing it believed the charges should not be brought and said it was seeking to show the department that it is in compliance with fair lending laws.

The government investigation found that loans submitted to Wells Fargo by mortgage brokers had varied interest rates, fees, and costs based only on race and not correlated to the borrowers' creditworthiness, according to the court document.

The bank had no immediate comment on Thursday.

The disclosure came after Bank of America Corp.'s Countrywide Financial unit agreed in December to pay a record $335 million to settle similar charges.

Last year, San Francisco-based Wells Fargo received an $85 million penalty from the Federal Reserve Board over charges it steered borrowers into high-cost loans. The Fed ordered Wells to compensate certain borrowers between $1,000 and $20,000.

The cities of Baltimore and Memphis filed suits alleging Wells Fargo engaged in "reverse redlining," or intentionally targeting minority communities for predatory mortgage loans, leading to high foreclosures in minority neighborhoods.

In May, Memphis agreed to drop its suit after Wells Fargo agreed to contribute $7.5 million toward local homeowner and economic development initiatives. The bank also set a $425 million mortgage lending goal in the Memphis area, including $125 million in loans for low- and moderate-income borrowers.