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BALTIMORE - One of the nation’s leading mortgage companies engaged in a pattern of predatory lending practices in Black neighborhoods, according to a federal lawsuit filed by Mayor Sheila Dixon’s administration. The suit against California-based Wells Fargo Bank could put this majority-Black city in the forefront of the national debate over the subprime lending crisis, officials said. Although lenders have come under legal attack from investors and borrowers, Baltimore’s suit could be the first in which a city attempts to recapture costs associated with foreclosed homes that end up vacant. The lawsuit was filed Jan. 8. Baltimore officials allege the bank sold higher-interest subprime mortgages to Blacks more frequently than to Whites, in a practice known as reverse redlining, in violation of federal housing law. “We’ve identified a predatory lending practice that we feel confident we can prove occurred and that we know for a fact is illegal,” said Dixon spokesman Sterling Clifford. “We’re going to hold lending institutions responsible.” Wells Fargo said in a statement that race does not play a factor in its pricing. The high rate of foreclosures has cost the city tens of millions of dollars in unrealized property tax revenue, added police and fire protection and legal costs, according to Solicitor George Nilson, although the suit itself does not include a financial estimate of damages. Since 2000, more than 33,000 Baltimore homes have been subjected to foreclosure filings, officials said. Wells Fargo, one of the two largest mortgage providers in the city since 2004, made 1,285 loans a year totaling more than $600 million from 2004 through 2006. Most of the company’s loans that resulted in foreclosure were made in Black neighborhoods. In 2005 and 2006, two-thirds of the company’s foreclosures were in census tracts where at least 60 percent of the residents were Black, according to the lawsuit. The company’s foreclosure rate in Black neighborhoods is nearly the double its overall average in the city, the lawsuit says. “Wells Fargo has been, and continues to be, engaged in a pattern or practice of unfair, deceptive and discriminatory lending activity in Baltimore’s minority neighborhoods that have the effect and purpose of placing inexperienced and undeserved borrowers in loans they cannot afford,” the lawsuit says. Although Wells Fargo said it does not comment on pending litigation, spokeswoman Debora Blume said in a statement that the company considers only credit risk when making loans. “We do not tolerate illegal discrimination against, or unfair treatment of, any consumer,” she said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly—our continued growth depends on it.” (AP)
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