Heat Rising For Alleged 'Ghetto Loans' Peddler As DOJ Focuses Crosshairs On 'Stagecoach To Hell' Over Reverse-Redlining Allegations
The Huffington Post reports:
- The Department of Justice is preparing a lawsuit against Wells Fargo, the nation's largest home mortgage lender, for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.
- The company, the fourth-largest U.S. bank by assets, is currently embroiled in pre-lawsuit negotiations with the Justice Department in hopes it will settle the accusations and avoid a public lawsuit, these people said. The allegations mirror those in public actions taken by the Federal Reserve and a separate lawsuit filed by the city of Baltimore.(1)
- Last week, the Fed said that perhaps more than 10,000 borrowers were inappropriately steered into subprime mortgage loans or had their loan documents falsified by bank personnel. Wells Fargo agreed to pay
$85 million to settle the civil charges.(2) It did not admit wrongdoing. - In its ongoing case against Baltimore, Wells Fargo stands accused of using those same practices, but deploying them against black borrowers in majority-black neighborhoods, an act commonly known as "reverse redlining." The city alleges that the bank targeted black borrowers, knowing they'd ultimately default on their loans, but did not fear shouldering the cost because Wells sold those loans to investors.(3) Wells Fargo denies the allegations.
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- The previously-undisclosed Justice probe, which is being led by the Civil Rights division's Fair Lending Unit, lends credence to the city's lawsuit, sources told The Huffington Post. [...] Taken together, the various investigations paint a picture of a lender that profited by knowingly targeting less-sophisticated borrowers, in particular preying upon those communities that traditionally lacked access to a full range of consumer credit products.
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- Wells Fargo has fought lawsuits from Baltimore and the city of Memphis alleging that the bank preyed upon black borrowers;(4) settled claims it illegally steered credit-worthy borrowers into subprime loans and misled investors about the risks of mortgage-backed securities it sold; and fought investigations and regulatory actions stemming from revelations that it employed so-called "robo-signers," the agents directed by lenders to process foreclosure filings en masse without examining the underlying paperwork.
For the story, see Wells Fargo Target Of Justice Department Probe; Agency Alleges Discriminatory Lending.
(2) See Fed $85M 'Pick-A-Pay' Settlement With 'Stagecoach To Hell' - Just Another Wrist-Slap?
(3) See The Daily Record: Ex-workers allege race-based loan approach at Wells Fargo, which describes, in Baltimore's earlier complaints, testimony from two former high-ranking Wells Fargo employees stating that Wells Fargo intentionally made bad loans to African-Americans.
The employees, who worked out of Virginia and Maryland but knowledgeable about the company's national lending practices, according to the complaints, said Wells Fargo marketed subprime loans to predominantly African-American ZIP codes and churches, used software to "translate" marketing materials into African-American vernacular, joked that borrowers who were deceptively steered from prime into subprime loans were "riding the stagecoach to Hell," and that company officials referred to the loans in minority communities as "ghetto loans" and to the borrowers as "mud people," according to The Daily Record story.
See also, Pennsylvania Joins Baltimore, Memphis With Pending Lawsuit Accusing Alleged "Ghetto Loans" Peddler With Reverse Redlining In Philly Neighborhoods, where the state of Pennsylvania also weighed in with 'reverse-redlining' allegations in a lawsuit against Wells Fargo in connection with loans made in the city of Philadelphia. See Commonwealth of Pennsylvania v. Wells Fargo Bank, N.A.
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