Oakland lawsuit accuses Wells Fargo of mortgage discrimination
This is a reuters.com article.
The City of Oakland, California has sued Wells Fargo & Co, accusing the largest U.S. mortgage lender of steering minorities into high-cost mortgage loans that allegedly led to foreclosures, abandoned properties and neighborhood blight.
The complaint is a sign that U.S. municipalities are not relenting in a push to hold big banks liable for economic damages following the 2007 foreclosure crisis.
Similar lawsuits accusing banks of mortgage discrimination have been dismissed, though a federal appeals court in Florida recently gave three major cases new life by affirming cities’ right to sue under the U.S. Fair Housing Act (FHA).
Filed on Monday in a Northern California federal court, the complaint against Wells seeks punitive damages for alleged FHA violations, accusing the bank of “putting its financial interests ahead of its customers and the City of Oakland in order to maximize profits.”
Wells Fargo spokesman Tom Goyda said the accusations “do not reflect how we operate in the communities where we do business.” The bank will vigorously defend its record as a fair and responsible lender, he said.
Oakland’s lawsuit accuses Wells of targeting minorities for high-cost loans even if they qualified for more affordable loans. The lawsuit said many of the loans ended in foreclosure because Wells refused to refinance them on the same terms it granted to white borrowers.
The lawsuit also accuses Wells of violating the California Fair Employment and Housing Act, which bars discrimination in housing practices on the basis of race.
The lawsuit said Wells steered minorities into various types of “predatory loans,” including those with high interest rates, balloon payments and large prepayment penalties.
African-American borrowers in Oakland were 2.4 times more likely to receive a predatory loan than comparable white borrowers, the lawsuit said. Hispanic borrowers were 2.5 times more likely to receive a predatory loan, the lawsuit said.
Loans in minority neighborhoods were 4.75 times more likely to end in foreclosure, the lawsuit said.
The disproportionate number of foreclosures among minorities would not have happened if the bank applied uniform lending practices, the lawsuit said.
A similar lawsuit filed by the City of Los Angeles was dismissed in July by U.S. District Judge Otis Wright, who said Wells issued only 27 high-cost loans to minorities during the period covered by the lawsuit, and no evidence was offered that any of them resulted in foreclosure.
Los Angeles is appealing the ruling.
The case is City of Oakland v Wells Fargo Bank, U.S. District Court, Northern District of California, No 13-cv-4321
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