Attorneys: Predatory lending a civil rights issue
MEMPHIS, Tenn. (AP) - Predatory lending in the African-American community is the main civil rights issue of this era, witnesses told a House Judiciary subcommittee Monday...
MEMPHIS, Tenn. (AP) — Predatory lending in the African-American community is the main civil rights issue of this era, witnesses told a House Judiciary subcommittee Monday.
U.S. Reps. Steve Cohen and Sheila Jackson Lee listened to nine witnesses discuss foreclosures and bankruptcies during a field hearing held Monday at the University of Memphis’ law school. Cohen is the chairman of the House Subcommittee on Commercial and Administrative Law.
The location was significant because Memphis has sued Wells Fargo, accusing the lender of contributing to urban blight by targeting predominantly black neighborhoods to sell high-risk, high-cost subprime mortgages that resulted in foreclosure.
During his testimony, Memphis attorney Webb Brewer said discriminatory or predatory lending has done more than anything else to reverse financial gains made by African-Americans since the beginning of the civil rights movement.
“It is the civil rights issue of the era,” said Brewer, an attorney representing Memphis in its lawsuit against Wells Fargo.
Later in the hearing, Lee, D-Texas, asked Steve Lockwood, a community development director in the Memphis suburb of Frayser, if he agreed that predatory lending was the key civil rights issue of our time. Lockwood said he did.
“Nobody paid attention to predatory lending until Wall Street was affected,” Lockwood said.
Foreclosures remain a national problem, with more than 1 million American households likely to lose their homes to bank repossessions this year, according to RealtyTrac Inc., a foreclosure listing service.
In Memphis, more than one-fourth of single family homes had a foreclosure notification from 2000 to 2009, according to a University of Memphis report. The city lost 7,000 homeowners from 2005 to 2008, with foreclosure claiming two-thirds of those households.
Empty homes with boarded windows, unkempt lawns and trash-filled sidewalks line some Memphis neighborhoods where foreclosures are high. Some of these homes have become fire risks or magnets for crime. And residents who have kept up with mortgages have seen their homes decline in value because they live near foreclosed properties.
A glut of empty homes also leads to a drop in property taxes, which account for 62 percent of the city’s revenue, Memphis Mayor A C Wharton told the two House members.
In its lawsuit, Memphis claims 51 percent of loans made by Wells Fargo to black Shelby County households between 2004 and 2008 were subprime loans, while only 17 percent of mortgages made to white households in the same years were subprime. Between 2000 and 2008, the foreclosure rate on Wells Fargo loans in predominantly African-American neighborhoods in Memphis was eight times greater than in mostly white neighborhoods, the lawsuit alleges.
The lawsuit also claims Wells Fargo used aggressive marketing tactics, offering quick cash and loan consolidation, while failing to give borrowers details about rate adjustments during the life of the loan or balloon payments at the end of the term.
Wells Fargo says the lawsuit makes untrue claims and is an attempt to discredit the company and seek damages.
“It places blame for the city’s challenges where it doesn’t belong,” Wells Fargo said in a statement.
In other testimony, U.S. bankruptcy judges David Kennedy and Jennie Latta said they support changing federal law to allow homeowners facing foreclosure to modify their mortgages in bankruptcy court.
Current bankruptcy law does not allow judges to “cram down,” or adjust, mortgages on a debtor’s primary residence. An effort to change the law died last year in the U.S. Senate, but the issue could again be raised in the U.S. House.
Copyright 2010 The Associated Press.
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