Monday, January 4, 2010
City/County Sue Wells Fargo
Posted by Mary Cashiola on Mon, Jan 4, 2010 at 4:02 PM
While many of us were away from the office over the holidays (some of us trapped in snow storms in West Texas, but that's a story for another day and another blog), the Memphis and Shelby County governments were finalizing some last-minute business.
Last week, Memphis and Shelby County filed a federal lawsuit against Wells Fargo under the Fair Housing Act.
This is something local elected officials and attorneys have been talking about for some time in response to the credit crunch and the rise in area foreclosures.
More than a year ago, then-Shelby County mayor A C Wharton said the lawyer in him was about to come out:
"We're going to sue somebody if I have anything to say about it. ... I'm for whatever it takes."
At issue is whether mortgage companies tried to ensnare certain home buyers in exploitative loans.
From a November 2008 Flyer cover story:
The city of Baltimore also has a case pending in which it sued Wells Fargo, alleging that lenders participated in reverse red-lining."Two factors they relied heavily on there — a high degree of racial segregation in housing and a historical lack of access to traditional banks — I think exist in Memphis," Memphis Area Legal Services' Webb Brewer says. "We feel like we could make a very strong case in Memphis for disproportional bad terms for African-American borrowers."
Under the Baltimore case, as well as similar cases in Cleveland and San Diego, or a case brought by Shelby County, the jurisdiction would have to quantify the economic damage and prove that damage is attributable to the banks.
In Memphis and Shelby County, where the tax base rests on home values, the economic impact could be frightening. The county will be undergoing a property reappraisal next year, and it's expected that many homeowners will challenge the reappraisal.
In Baltimore, the city alleges that reverse redlining, or targeting black neighborhoods for bad loans, cost the city millions of dollars. During a recent hearing on Well Fargo's motion to dismiss, the federal judge on the case said he might limit the damages to the cost of dealing with only the 150 homes Wells Fargo foreclosed on, not the overall blight of the neighborhood (which foreclosed homes often contribute to) or the cost of increased services for those neighborhoods.
From an article in the Baltimore Sun:
John P. Relman, an attorney for the city, said it was the city's burden to show the widespread drain on property tax revenues caused by Wells Fargo's "illegal activity" and that it would be inappropriate to limit the lawsuit at this stage."If they did something illegal, which reverse redlining is," Relman said, "it's plausible that they are responsible for the consequences of their conduct."
To bolster its claims, the city has submitted sworn statements from two former Wells Fargo loan officers, who said bank employees targeted predominantly black ZIP codes for subprime loans that were referred to as "ghetto loans." The lawsuits filed against lenders by other cities did not offer such specific evidence, Relman said.
Similar cases in Cleveland and Birmingham have been dismissed.
Comments (5)
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I do understand why Memphis would wish to be part of a suit against Wells Fargo. It is the same mentality as many civil litigants. Jackpot justice. People forget that Memphis and Baltimore share similar demographics and similar rates of poverty. (even lousy newspaper ownership.) I recall that Wells Fargo was one of the very few banks that a Memphian could even consider as a lending source..even in the 'good times." Wells had programs, (some of them sub-prime), for sub-prime customers. Those loans were packaged and sold to Memphians which enabled Wells to be in compliance with the letter and spirit of the law according to Senator Chris Dodd, (D-CT.) You guys do remember that Dodd and Mass. Senator Barney Frank threatened those bankers through Fannie Mae and Freddie Mac, who did not aggressively lend to credit challenged buyers. We qualify on a large scale.
"Reverse red-lining." Now there is a twisted, nonsensical, phrase with legal sex appeal... that the media can jump on! Any 5 O'clock T.V., bubble headed, bleach blond can smile and feign concern (and understanding), as she reads this type of copy to thousands of viewers, many of whom signed up for these sub-prime loans. What this copy fails to mention is that many of these Wells Fargo sub-prime loans were offered by minority owned mortgage brokers, with black loan officers, for the purchase of homes sold by black owned real-estate companies, by black real-estate agents....to black families! No racism here. Simply supply and demand.
As an attorney, I can understand how Mayor Wharton can sense a long-shot payoff that beats Tunica on any Saturday night. That's why we need tort-reform. Sadder still is that all involved seem more concerned with a pay off than with the future effects this will have on consumer lending in The Mid-South.
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Zebra, what a wonderful selection of misdirections you provide, I can't decide where to start.
It's not about racism, it's about targeting poor black families for subprime loans. Just because black bankers cashed in on black families doesn't make it ok. Plus, they weren't all black bankers and black real estate agents.
Supply and demand. Hmmm. Let's see. Offering financing for something people want but can't afford, in order to bundle those financial packages for resale to people who want something safe to invest in. That's not supply and demand - that's a scam. Just because people are willing and eager to be scammed doesn't make scamming ok.
As for the law, the law was written by the bankers. That's why a lawsuit is the city's only recourse. If the laws were stronger, and banks, hospitals, corporations and insurance companies, and their officers and managers, could be held criminally liable for their morally repugnant actions, a lawsuit wouldn't be the only way of obtaining justice, and we wouldn't need tort reform, would we?
Sue B of A while you are at it. Those bastards broke into a friend's house after deeming it vacant, changed her locks and stole her computer and a T.V. They deemed it vacant by driving by and not seeing her at home (their words). She was current on her payments, insurance and utilities. I'm not sure what part of that led them to think her house was vacant. When she called, B of A at first denied it. Then said they did it and it was in her contract that if they deemed it vacant they had a right to "investigate". But they eventually said they would send her a key, which she has not received to this day (it's been over a month) and asked her not to call the police.
The police would not take a theft report anyway since it was broken into by a bank. Since when did banks become God and above any rules of decenct, moral and/or ethical conduct?
This young woman works hard to have the few things she has. She's not on welfare with a brood of fatherless children. She is a decent, mature and responsible young adult without the means to fight a huge bank.
I dont' understand even what the purpose of breaking into her home could have been. They weren't foreclosing. She was not in danger of losing the house. It's a small common house worth about 50K in a red lined district. Surely they own enough of those by now!
It was pure harassment. To what end I can not fathom. Makes no sense AT ALL.
I would suggest supporting your local neighborhood bank and put those bastards out of business but as we alll know, the Government will just bail those bastards out. With our money.
I do not like our current system. Makes a person want to not aspire to own or do anything. This is so ANTI for what our country stands.
What has happened to us as a nation?
Except your local neighborhood bank might sell your mortgage to Bank of America, which is what happened to mine. When that happens, there is nothing you can do to prevent it.
Twice in the last four months, Bank of America has posted my payment after the end of the grace period and charged me a late fee. Of course, the payment came out of my account before the end of the grace period, and I have the bank records to prove it, but it costs BoA nothing to hold that money five or six days and post it late. A certain percentage of their customers are going to just pay it, and they can simply refund the late fee to those who call to complain, like I did.
Oh, Jeff, you are so right about about selling mortgages. I forgot about that. It's been a while since that's happened to me. But the posting payments late is the WORST. I once paid off a credit card 5 times. But the late postings kept it going.
I do love my neighborhood bank though.
First Alliance Bank. Really awesome folks. Not a lot of frills (don't sell bonds, can't make deposits at the ATM, and a few other things I am used to at bigger banks) but they do allow you to use First Tennessee Bank's ATMs at no charge. I love First Alliance Bank. I keep a small account at a bigger bank for the frills.
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