Home >> Daily Dose >> Wells Fargo Accused of ‘Redlining’ in Lawsuit by City of Oakland
Print This Post Print This Post

Wells Fargo Accused of ‘Redlining’ in Lawsuit by City of Oakland

gavelThe city of Oakland, California, has filed a lawsuit against Wells Fargo accusing the bank of reverse redlining by targeting minorities for high-cost mortgage loans which later led to foreclosures and blight when the borrowers defaulted.

Oakland's lawsuit, filed in the U.S. District Court, Northern District of California, accuses the nation's largest mortgage lender of violating the U.S. Fair Housing Act by steering minorities toward high-cost, "predatory" mortgage loans even if they qualified for more affordable loans, according to a report from Reuters. These loans included extra costs such as high interest rates, balloon payments, and large prepayment penalties, according to the suit

The lawsuit alleges that Wells Fargo refused to refinance these high-cost loans to minorities on the same terms for which they refinanced loans to white borrowers, which resulted in a disproportionate number of foreclosures that subsequently led to abandoned properties and neighborhood blight. According to the lawsuit, African-American and Hispanic borrowers in Oakland were 2.4 and 2.5 percent more likely to receive a predatory mortgage loan than comparable white borrowers. The lawsuit also states that loans made for houses in minority neighborhoods were 4.75 times more likely to end in foreclosure. According to the lawsuit, the disproportionate number of foreclosures would not have occurred had the bank applied uniform lending practices.

"Wells Fargo has been a part of the Oakland community for more than 140 years and we will vigorously defend our record as a fair and responsible lender."

The City of Oakland is also accusing Wells Fargo of violating the California Fair Employment and Housing Act, which, like the FHA's Fair Housing Act, bans all forms of discrimination in housing, including discrimination based on race.

Wells Fargo spokesman Tom Goyda expressed disappointment at the way the situation was handled and denied the City of Oakland's allegations. Wells Fargo is headquartered in nearby San Francisco.

"The City Attorney’s (Barbara Parker's) accusations against Wells Fargo do not reflect how we operate in the communities where we do business and it’s disappointing that she has chosen this course of action over a collaborative approach to helping borrowers and homeowners in Oakland," Goyda said in an email to DS News. "Wells Fargo has been a part of the Oakland community for more than 140 years and we will vigorously defend our record as a fair and responsible lender. We will continue to focus on helping customers in Oakland and its surrounding communities succeed financially, and on expanding homeownership in California and across the United States."

In early September, the 11th U.S. Circuit Court of Appeals revived three lawsuits the were brought about by the City of Miami, accusing Wells Fargo, Bank of America, and Citigroup of discriminatory and predatory mortgage lending practices to minority borrowers. However, a reverse redlining suit against Wells Fargo filed by the City of Los Angeles was dismissed in July. In early September, the City of Los Angeles dropped a reverse redlining case against JPMorgan Chase.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
x

Check Also

Disaster Relief Bill Stalls in U.S. House of Representatives

A bill containing more than $19 billion in aid for disaster relief may not advance ...

GET THE NEWS YOU NEED, WHEN YOU NEED IT.

With daily content from MReport, you’ll never miss another important headline in originations, lending, or servicing. Subscribe to MDaily to begin receiving a complimentary daily email containing the top mortgage news and market information.