In Memphis, Tennessee, The Commercial Appeal
- The city of Memphis and Shelby County, joining a host of governments across the country hit hard by the foreclosure crisis, filed a federal lawsuit [last] Wednesday against financial services giant Wells Fargo. The suit alleges that "unlawful, irresponsible, unfair, deceptive and discriminatory" lending practices by Wells Fargo in Memphis and Shelby County violated the Fair Housing Act.(1)
- "We're here because we want to go on record affirming our belief that the unfair lending practices that have wreaked havoc on individuals and families have also impacted the larger community," said Mayor A C Wharton during a news conference at the National Civil Rights Museum. "Many of the bad loans that have been doled out by unscrupulous lenders have been like giving families boats with crepe-paper bottoms. No bucket brigade and no amount of hard work can keep you from sinking in a vessel that is doomed from the very start."(2)
- The complaint unveiled Wednesday includes testimony from two former high-ranking Wells Fargo employees involved in [a] Baltimore suit [accusing Wells Fargo of similar conduct] who say Wells Fargo intentionally made bad loans to African-Americans. The employees, who worked out of Virginia and Maryland but are knowledgeable about the company's national lending practices, said Wells Fargo marketed subprime loans to predominantly African-American ZIP codes and that company officials referred to the loans as "ghetto loans." The complaint also says Wells Fargo steered black clients who qualified for prime loans into more costly subprime loans, which produced greater profits for Wells Fargo and its agents.
- "They know how to make good loans, yet they aren't making them in the black community," said John Relman of Relman & Dane, the Washington-based firm that is representing the city and county in the lawsuit, along with [Webb] Brewer and Steve Barlow. Relman & Dane also represents Baltimore in its suit.(3) "They did it because they could make more money," said Relman. "They made the money and let Memphis and Shelby County hold the bag."(4)
For the story, see Memphis, Shelby County sue Wells Fargo over lending practices (Allege actions violated Fair Housing Act).
For the lawsuit, see City of Memphis & Shelby County v. Wells Fargo Bank N.A., et al.
Go here for other posts on Wells Fargo and its alleged ghetto loans peddling.
(1) According to this report, so many homes are lost each year in Memphis to foreclosure sales that occur on the Shelby County Courthouse steps that the problem attracted national attention last year. A film crew for the PBS television show “NOW with David Brancaccio” came to Memphis and studied the problem, talked to politicians such as Shelby County Mayor A C Wharton Jr. and even ventured out to foreclosure hotspots like Frayser. Go here for the video of the PBS' NOW program on the foreclosure problem in Shelby County, and here for the transcript of the NOW program.
(2) According to another report, Mayor Wharton was quoted further:
- “These are very astute people who knew the difference between a good loan and a bad loan. Sure, there was federal pressure to make loans to groups who were customarily ‘non-banked,’ as we often say, who didn’t have access to traditional credit. Sure, and that’s a good motive. But, as is the case with most federal programs, there’s going to be abuse. And we think that this is one instance in which what was intended for good was exploited to be used for ill.”
(3) For the City of Baltimore lawsuit, see Mayor and City Council of Baltimore v. Wells Fargo Bank N.A. et al.
This story adds that Illinois Attorney General Lisa Madigan also filed a lawsuit last summer accusing Wells Fargo of marketing high-cost mortgage loans to black and Latino customers while selling lower-cost loans to white borrowers with similar incomes. The cumulative effect, Ms. Madigan argued, was to turn the black and Latino neighborhoods of the nation’s cities “into ground zero for subprime lending.” See:
In addition, in March, 2009, the National Association for the Advancement of Colored People ("NAACP") also filed suit against Wells Fargo alleging systematic, institutionalized racism in sub-prime home mortgage lending. See:
(4) For related links on the problems in the subprime mortgage market, see: