Wells Fargo Accused of Predatory Lending

January 8, 2008 No Comments »

Baltimore Mayor Sheila Dixon’s administration filed suit today in U.S. District Court alleging that Wells Fargo Bank engaged in predatory lending practices in black neighborhoods within the city.

According to a lawsuit, black neighborhoods in Baltimore were disproportionately affected by the subprime mortgage crisis, with most of the company’s loans that ended in foreclosure made in neighborhoods where the population is more than 80 percent black.

“When you have foreclosures, the property values drop, and you get less tax revenue. There’s fire and police costs that come from abandoned and boarded-up and vacant properties,” said John P. Relman, a Washington-based attorney who is representing the city in the lawsuit. “It leads to crime and drugs and school problems as the community is being destabilized.”

The lawsuit claims Wells Fargo used a practice known as “reverse redlining”, which instead of denying loans to a certain group or community, exploits that group with higher fees, rates, and penalties, an illegal practice under the federal Fair Housing Act.

For example, it claims that mortgages for homes worth $75,000 or less, most of which happened to be located in black neighborhoods, had inflated mortgage rates that were riddled with fees and surcharges.

“You could be equally well-qualified, but if you happen to buy a house that’s worth $75,000 or less, you’re going to pay more,” Relman said.

San Francisco-based Wells Fargo does not comment on pending litigation, but spokeswoman Debora Blume said in a statement that the bank did not consider race when originating loans.

“We do not tolerate illegal discrimination against, or unfair treatment of, any consumer,” Blume said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly – our continued growth depends on it.”

Wells Fargo has been one of the two largest mortgage providers in Baltimore since 2004, making 1,285 loans a year totaling more than $600 million from 2004 through 2006.

The lawsuit says more than 33,000 homes in Baltimore have been subjected to foreclosure filings since 2000, and Wells Fargo has more foreclosures than any other mortgage lender.

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