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"A Modern Fair Lending Case in Baltimore"

July/August 2009 issue of Poverty & Race

We received news as we went to press of progress in a landmark fair lending case in Baltimore, where the City of Baltimore has sued Wells Fargo Bank, alleging discriminatory lending policies that have led to a wave of foreclosures costing the City millions (the suit does not address the many different kinds of costs imposed on the city’s minority homeowners). The City’s costs are due to an eroding tax base and needed additional public services, such as sanitation. Between 2005 and 2008, more than half of the 379 properties subject to a Wells Fargo foreclosure resulted in vacancies, and 71% of those vacancies were in mostly black neighborhoods.

In early July, U.S. District Judge Benson E. Legg denied the bank’s motion to dismiss the suit, giving the City the right to proceed with discovery, a process that could gain access to the inner workings one of the region’s largest mortgage providers. The City is represented by Relman & Dane, a well known national civil rights firm.

The City alleges that in 2006, Wells Fargo made subprime loans to 65% of its black customers, compared to 15% to its white customers. Affidavits submitted by two whistle-blower bank employees said they witnessed the company “steer” black borrowers into higher-interest subprime loans (termed “ghetto loans” by other employees), even when they qualified for traditional, cheaper loans—thereby undermining the bank’s claim that the racially disparate loan rate was based on financial risk factors.

The suit of course will be watched closely by other city governments (a Cleveland lawsuit with similar themes was dismissed by a judge who said it was too broad). The next discovery hearing in the Baltimore case is scheduled for July 20. For background on the case, Mayor and City Council of Baltimore v. Wells Fargo Bank N.A. et al. go to www.relmanlaw.com.

— the editor
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