City of Baltimore claims damages from bank's alleged predatory lending
U.S. District Judge Benson E. Legg on July 2 denied a motion by Wells Fargo bank to dismiss a lawsuit brought by the city of Baltimore against the banking giant, claiming damages stemming from alleged direct targeting of low-income and minority people for sub-prime mortgage loans. The suit was the first of its kind, in that the city says it and not just the borrowers have suffered damages. (Baltimore Sun, July 2).
Wells Fargo charged with predatory lending
A similar case before the U.S. Supreme Court, in which the New York attorney general seeks to investigate whether national banks discriminated against mortgage-seeking minorities, was allowed to continue June 29.
Attorneys for Baltimore argued that Wells Fargo deliberately targeted and manipulated Black customers in violation of the federal Fair Housing Act, leading to increased economic distress for the city in the form of reduced tax revenue and increased costs in public services.
"We continue to believe that this lawsuit lacks merit," said Cara Heiden, co-president of Wells Fargo Home Mortgage. "We have responsibly made homeownership possible for Baltimore borrowers using the many controls we have in place to ensure race is not a factor in the pricing and products we offer."
Racist lending practices
Beth Jacobson and Tony Paschal, former loan officers at Wells Fargo, do not simply disagree; they have stated in affidavits that Black people were deliberately targeted for sub-prime loans, that racism was directly involved, and that Black community institutions, like churches, were used for leverage.
Jacobson, who was once one of Wells Fargo's "top-producing" sub-prime loan officers, told the court that Black borrowers were deliberately pushed into sub-prime loans even if they qualified for prime rates. She described deliberate manipulation, against the borrowers' wishes, of loan-application materials, such as non-disclosure of financial records and using one person's credit report for another applicant.
Paschal told of a targeted unit Wells Fargo deployed in 2001 for the mid-Atlantic region, especially areas with large African-American populations like Baltimore, southeastern Washington, D.C., and Prince George's County, Md. He also said that sub-prime loans were called "ghetto loans" by other officers, and that Blacks were called "niggers" and "mud people" who "have bad credit" and "don't pay their bills."
The difference between prime and sub-prime interest rates on a mortgage can be the difference between life and death for people: For a $165,000 loan, a typical difference of three percentage points adds over $100,000 in interest payments, as well as adversely affecting subsequent credit scores.
While Baltimore, through its lawsuit, has become the most public face of the campaign against predatory lending, other areas of the country and segments of the population are similarly affected.
Whereas Black borrowers in Baltimore received sub-prime rates 34 percent of the time in 2007, Chicago-area Blacks received them 49 percent of the time, including 34 percent of those earning $120,000 or more, compared to 22 percent of white borrowers earning less than $40,000. The same trend was visible in Baltimore. (The Chicago Reporter, June 22)
Likewise, Wells Fargo only backed off attempts to liquidate Hartmarx Inc. and the jobs of its 4,000 workers due to immense public pressure, including a threatened workplace occupation by the workers. But the bank has refused to extend credit to other small businesses like Quad City Die Casting in Moline, Ill., jeopardizing thousands of jobs.
Banks under capitalism are all too eager to victimize the most exploited and vulnerable segments of society in pursuit of profit. By preying on the dreams of oppressed people, Wells Fargo and other lenders unabashedly ruined lives to inflate their bottom line.
Even the crisis caused by the overproduction of housing and the resulting explosion of sub-prime foreclosures has been used by big banks to further their aims for ultimate profits: After taking billions of taxpayer dollars from the government, the largest U.S. banks consumed their weaker competitors, speculated on volatile international markets and pocketed billions more in outright profit, all while working people continue to bear the brunt of the worst economic crisis since the Great Depression.