Wells Fargo sued for racially biased lending
(AP Photo/Seth Perlman, File)
MICHAEL TARM, The Associated Press
CHICAGO (AP) — Illinois filed a lawsuit on Friday against Wells Fargo & Co. accusing it of discriminating against black and Latino homeowners by employing racially biased lending practices.
San Francisco-based Wells Fargo & Co. allegedly sold high-cost subprime mortgage loans to minorities while white borrowers with similar incomes received lower-cost loans, according to the lawsuit, filed in Cook County Circuit Court by Illinois Attorney General Lisa Madigan.
“As a result of its discriminatory and illegal mortgage-lending practices, Wells Fargo transformed our cities’ predominantly African-American and Latino neighborhoods into ground zero for subprime lending,” Madigan said.
She announced the lawsuit at a Chicago news conference, flanked by a color-coded map of the city — red indicating where more than 50 percent of loans from Wells Fargo were high-cost loans. Many predominantly black neighborhoods on the South Side were drenched in red.
The lawsuit cites a report on such loans from banks in the Chicago area by The Chicago Reporter. The newsmagazine’s investigation concluded that blacks were three times as likely as whites — Latinos were twice as likely — to end up with high-cost loans.
Madigan said the lawsuit was the first in the nation filed by an attorney general against Walls Fargo — though Baltimore and the NAACP have filed a similar suits.
In a statement reacting to the Illinois lawsuit, Wells Fargo denied race played any role in how it did business.
“Our pricing is competitive and reflects the risk in the transaction including credit, loan type, loan-to-value ratio and property type,” it said. “Prime pricing is made available to all borrowers who qualify.”
The lawsuit seeks to rescind all contracts between Wells Fargo and any consumers allegedly discriminated against, and it calls on the court to grant full restitution to those consumers.
In 2007, around 49 percent of Wells Fargo’s black borrowers and 25 percent of Latinos were sold a high-cost loan in the Chicago area, according to the lawsuit. That compared with only 15 percent of white borrowers.
The lawsuit also accuses Wells Fargo of poor oversight that enabled its employees to steer blacks and Latinos into subprime loans. And it alleges that the company targeted blacks for high-cost loans with wealth-building seminars at cities around the country, including Chicago.
Madigan said the kind of subprime loans sold by Wells Fargo are defaulting and going into foreclosure in record numbers, helping to contribute to economic hardships nationwide.
“I’m talking of the worst of the worst bad loans that were sold in the run-up to the collapse of the housing market,” she said.
Illinois registered nearly 69,000 foreclosure filings in the first part of 2009, up nearly 30 percent from the first half of 2008, according to the attorney general’s office.
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