Bank Being Sued For Being Racist In Foreclosure Crisis

January 10th, 2008 | Tags: Foreclosure Crisis

Well Fargo is being charged in court by the Mayor and City Council of Baltimore for being racist in its lending practices by discriminating against blacks. As a result foreclosures have increased. This has negatively impacted on tax collection. Many other municipalities like Cleveland and Buffalo are honing down on lenders for having precipitated this unprecedented situation. Millions have been rendered homeless with rising interest rates in the sub-prime mortgage. Abandoned properties are attracting crime and nefarious activities leading to arson, drugs and flesh trade.

The civil suit being filed by Baltimore will undoubtedly set a precedent for other lenders to be likewise sued for predatory lending. Municipalities across the country are struggling with reduced budgets.

Mayor Sheila Dixon and the members of the City Council have requested the court to stop Wells Fargo from charging higher rates from black borrowers. It was mostly the blacks that availed of the sub-prime teaser rates because they did not have the credit worthiness for prime loans. They had hoped to improve their life style and move into houses of their own. But with interests doubling and sometimes trebling they are the most likely to default.

The interest rate of Well Fargo was 3% higher than permissible. 65% of those having to bear it are blacks. Only 15% of the whites have been subjected to this. In the same way refinancing is costlier for the blacks than for the whites. Blacks have to pay higher prepayment penalties.

The Mayor and Council have demanded damages to make up for the loss of property revenue and for the extra costs it has had to incur for providing police protection to prevent arson and looting. The entire neighbourhood has become danger zones sitting in the middle of abandoned houses. Suzanne Sangree, who is the chief solicitor of Baltimore city’s department of law, says that the foreclosure slur on the minority localities cancels all the development work that had been done in the distressed regions so far. The economic progress has been halted. Wells Fargo and other lending groups could have done a lot to stem the tide of foreclosures. Instead they have been giving higher commissions to agents who bring in more sub-prime borrowers.

Ken Waetke of Well Fargo outright rejected the racist allegation saying that their loan structure is based on the credit ratings of the borrower.

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