Wells Fargo, Memphis resolve mortgage lawsuitBy Adrian Sainz Associated Press | Last updated: Jun 8, 2012 - 8:48:30 AM
The city and county have agreed to dismiss the federal suit filed in late December 2009, the bank said in a May 29 statement. The suit alleged that the mortgage lender targeted minority communities for predatory practices that resulted in high-risk subprime loans that led to a higher number of foreclosures in those areas.
The governments claimed that the foreclosures caused extreme blight, vacancies, reduced property values and lower tax revenues.
In return for the dismissal, Wells Fargo agreed to invest $7.5 million in the city and county for mortgage down payment and home renovation assistance, and to advance programs related to improving economic vitality and increasing financial literacy.
Wells Fargo also has set a five-year mortgage lending goal of $425 million for the city and county, including $125 million to low- and moderate-income borrowers, the company said.
County Mayor Mark Luttrell said some details of the agreement were still being finalized.
“We recognize that there have been some issues that needed to be addressed, and the three parties in their discussions have addressed them,” Mr. Luttrell told The Associated Press.
The company’s statement said it still denies the predatory lending accusations.
“We agreed that it was in the best interests of everyone involved to work together rather than to continue to be involved in a protracted legal fight,” said Leigh Collier, Wells Fargo regional president for the Mid-South, which includes Memphis.
A complaint filed as part of the lawsuit included details from former employees about how they were instructed to find Blacks with high consumer debt and persuade them to apply for new subprime loans. Memphis claimed 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 Black neighborhoods in Memphis was eight times greater than in mostly White neighborhoods, the lawsuit alleged.
The lawsuit also claimed 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.
“The condition of the local housing market continues to challenge Memphis and Shelby County significantly, as unoccupied homes and excessive housing inventory weigh heavily on communities,” Memphis Mayor A.C. Wharton Jr. said in the company’s statement. “We are pleased to announce this collaborative partnership to get more of these houses reoccupied and increase neighborhood stability.”
Under the deal, Wells Fargo will provide grants totaling $4.5 million for mortgage down payment and home renovation assistance. Individuals who want to buy homes and live in Memphis and Shelby County can qualify for grants worth up to $15,000 each under a home ownership program.
Prospective homebuyers must have a family income not above 120 percent of the area median income and must complete a homebuyer education session to qualify for the grant. They also must agree to live in the home for five years. If they move before five years, they will have to return a pro-rated portion of the down payment or renovation grant.
Another $3 million will go to local programs geared to strengthen the economy, preserve public safety and improve financial literacy.
Occupiers confront Wells Fargo shareholders (FCN, 05-07-2012)
Payday loan fees boon for banks (FCN, 08-15-2009)
Payday loans squeeze millions in fees (FCN, 04-10-2009)
How to avoid debt slavery (EconomicWarfare.org)