Recent news reports indicate that the city of Philadelphia has filed a lawsuit against Wells Fargo & Co. The suit alleges that Wells Fargo exercised predatory lending practices aimed at perspective minority homeowners. These practices are in violation of the Fair Housing Act of 1968.
The particulars of the allegations are this: The city of Philadelphia alleges that the San Francisco based bank steered black and Hispanic mortgage borrowers to high risk loans despite the fact that these borrowers had displayed the credit worthiness to qualify for lower risk low-interest loans. Philadelphia contends that the bank continued their ill treatment by later making refinance opportunities unavailable to these borrowers resulting in a high number of home foreclosures. The city studied this claim for a year before finally filing the lawsuit. After careful inspection of loans made by Wells Fargo to Philadelphia residents over a ten year period it was determined that black borrowers were 2 times likely and Hispanic borrowers 1.7 times likely to have higher interest loans than white borrowers despite similar credit scores.
Philadelphia states in their suit that the actions of Wells Fargo has resulted in increased blighting in the city’s minority neighborhoods because of the high foreclosure rates. The city asserts that homes in minority neighborhoods are nearly 5 times more likely to be foreclosed upon than homes in predominantly white neighborhoods. The city of Philadelphia is seeking unspecified money damages in addition to an injunction that would put an end to the bank’s predatory practices.
Philadelphia’s lawsuit against Wells Fargo is the latest in a long list of woes for the embattled bank. The company is still reeling from a recent scandal in which the company was caught creating fake customer account to assure sales goals were reached. Philadelphia filed it’s suit two weeks after a ruling by the Supreme Court that stipulated the bank could indeed be sued under the Fair Housing Act provided a direct causal link can be established between predatory lending practices and the resulting damage.
Contrary to the contrite stance Wells Fargo took while dealing with the fake account scandal, the bank has chosen to come out swinging in response to the Philadelphia lawsuit. The bank vehemently states that the claims against them are unsubstantiated.
Karl Heideck is a Philadelphia based attorney dedicated to ensuring that greater Philadelphia residents fully understand the laws that govern their lives. Heideck’s legal practice focuses on civil Litigation, compliance, and risk management.
Karl Heideck is currently reviewing discovery items for bank litigation and securities fraud allegations resulting from the 2008 mortgage crisis. Visit: https://www.facebook.com/public/Karl-Heideck