Litigation In Baltimore City's "Ghetto Loans" Case To Go Forward As Judge Denies Wells Fargo's Request To Dismiss Suit

In Baltimore, Maryland, The Maryland Daily Record reports:

• The city of Baltimore’s mortgage-lending discrimination lawsuit against Wells Fargo Bank N.A. may proceed to what will be a “time consuming and expensive” discovery process, a federal judge ruled Thursday afternoon. Chief U.S. District Judge Benson E. Legg rejected the bank’s motion to dismiss the suit, four days after hearing arguments about the city’s alleged damages. The decision means the city will get access to more details about Wells Fargo’s lending practices since 2000; it had previously relied solely on publicly available information and information from a few industry insiders.

• The city claims the bank targeted black borrowers for subprime loans, a practice known as reverse-redlining, and that the resulting foreclosures have cost it tens of millions of dollars in lost property revenues and police, fire, and rehab expenditures.

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• “Based on the new affidavits submitted by former Wells Fargo employees Elizabeth Jacobson and Tony Paschal, the City has proffered sufficient proof to proceed with its claim for disparate treatment discrimination under the Fair Housing Act,” Legg wrote in a 4-page memorandum.(1)(2) [...] The ruling represents a big victory for the city, since its suit was the first of its kind when filed in January 2008. A similar suit brought by the city of Cleveland under a public nuisance theory was dismissed in May.

For more, see Judge won’t dismiss City’s suit against Wells Fargo (if link expires, try here).

Go here for Judge Legg's 4-page order.

For earlier reports on this case, see:

• The Maryland Daily Record: Ex-workers allege race-based loan approach at Wells Fargo,
• The New York Times: Bank Accused of Pushing Subprime Deals on Blacks.

(1) In addition to denying Wells Fargo's Motion To Dismiss the lawsuit, the court, in footnote 1 of this order, grants the City of Baltimore's Motion To Amend its Complaint.

(2) According to an earlier report, the two whistleblowers claimed their co-workers targeted black ZIP codes and churches, used software to “translate” marketing materials into African-American vernacular, and referred to subprime loans in minority communities as “ghetto loans” and to borrowers as “mud people.” The loan officers, who worked for Wells Fargo in the Baltimore-Washington area from the late 1990s until 2007, also reportedly alleged that bank employees deceptively steered prime borrowers into subprime loans for their own financial benefit and joked that they were “riding the stagecoach to Hell.”