Thursday, May 31, 2012

Memphis Makes Peace with Wells Fargo on Mortgages

Posted By on Thu, May 31, 2012 at 8:44 AM

blight.jpg
Can something good come out of the biggest real estate collapse and mortgage fiasco in Memphis history?

Mayor A C Wharton hopes so. On Wednesday, Wharton along with Shelby County Mayor Mark Luttrell and Wells Fargo officials held a news conference to talk about “our relationship” and the settlement of a lawsuit over people who had "unpleasant experiences" with home loans. The harmony was in stark contrast to the nasty lawsuit alleging that Wells Fargo made deceptive loans to poor people that caused a foreclosure crisis and depleted city coffers. The lawsuit became a touchstone for media reports about subprime mortgages and poverty in Memphis at a time when the city is losing residents to the suburbs and trying to improve its image.

In the agreement, described as a "term sheet" with details yet to be completed, Wells Fargo gives $7.5 million to Memphis and Shelby County to assist low-income borrowers who want to buy or fix up homes. Some of that will go to financial education ("Hands-On Banking" Wells Fargo calls it) for students as young as middle school as well as adult would-be homebuyers. A total of $4.5 million is marked for grants of up to $15,000 for renovation assistance. The homes do not have to be financed by Wells Fargo. Luttrell said "the lion's share" of the money will go to Memphis.

"This is a good and sound starting point," Wharton said. "Quite frankly, if you look at the age at which most lawsuits come to an end, this one was filed in 2010, and now its may 2012, to bring about this kind of relief, that's a baby walking in two months."

Wharton said he was mainly concerned about putting money in the hands of consumers now as opposed to what they might get six or seven years down the road.

"Lawsuits tend to go on and on," he said. "When you see an opportunity to get some money on the table, sometimes it's best to take that opportunity."

Wells Fargo was represented by Leigh Collier, regional president for the Mid-South.

"What a win-win for the citizens of Memphis and Shelby County," she said. She touted the benefits of "financial literacy" and said “we are thrilled to come to an agreement with the city and the county.”

Wells Fargo has set a goal of making $425 million in loans to local borrowers in the next five years, with $125 million of that targeted for low-income and middle-income buyers. Collier said the amount is "based on historical data we don't publish" when asked how it compares to the amount that Wells Fargo loaned in the five years preceding the housing collapse and the amount it would probably have loaned in Memphis and Shelby County over the next five years without this agreement.

The loans will be market rate, currently under 5 percent, rather than the sub-prime loans with confusing details and higher rates that got so many borrowers in trouble, Collier said.

Memphis City Councilman Harold Collins, whose Whitehaven district was the focus of a story in The New York Times in 2010 about blacks losing decades of economic gains because of foreclosures, was not impressed with the agreement.

"Typical of most settlements like that," he wrote in an email. "They place some crazy restrictions on people that might apply. You have to go to some training from a non profit? They know most people will NOT do that stuff and thereby Wells Fargo will not have to forgo the money. Question: Did Wells Fargo impose these kinds of challenges on these people BEFORE they approved their loans? What about doing these BEFORE they were foreclosed?"

One question is whether anyone will want to buy a blighted house in a declining neighborhood under any terms. Wharton said that with the assistance of community development corporations, he thinks there will be a market.

"Some of these neighborhoods are remarkably stable, and with the idea that I am not gong to be the only one trying to renovate a house, that is what's going to bring them in," he said.

City Attorney Herman Morris, who grew up in the Binghampton neighborhood in Memphis, said the deal will help stabilize neighborhoods by promoting ownership over renting.

"I think folks would rather live in homes that they own if they can," he said.

Webb Brewer, the former head of Memphis Legal Services now working as a private attorney with the city and county on the housing issue, said "We were in for a long haul had we continued on with the litigation. It would have been a long, grueling, expensive fight for everyone. You don't know what you would get down the road."

Brewer said the important parts are the $7.5 million in "hard money" and the commitment to make $125 million in standard loans in low and moderate-income areas once targeted for sub-prime loans.

He agreed that the issue of fraudulent loans remains unresolved.

"Education does not address cases where pretty sophisticated borrowers were deceived. I am an attorney who practices in that area and sometimes I wold look at a loan and say, 'hey, what does that mean?' Education doesn't fix that, but a lot of that lending has gone by the wayside anyway with the change in the market."

If nothing else, the settlement lets Memphis move on with a best-foot-forward campaign that was going to be difficult enough without the worst-foot-forward campaign in the lawsuit against Wells Fargo.

Tags: , , , ,

Comments (8)

Showing 1-8 of 8

Add a comment

 
Subscribe to this thread:
Showing 1-8 of 8

Add a comment

ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Speaking of...

ADVERTISEMENT
© 1996-2016

Contemporary Media
460 Tennessee Street, 2nd Floor | Memphis, TN 38103
Visit our other sites: Memphis Magazine | Memphis Parent | Inside Memphis Business
Powered by Foundation