More news is emerging about the sub-prime mortgage crisis and this time the spotlight is on Wells Fargo and the news is not pretty. Wells Fargo is about to be served papers by the Justice Department for taking advantage of African-American home-buyers and encouraging them to take out sub-prime loans at higher interest rates, even when the customers would have qualified for better interest rates.
Well’s Fargo is trying to avoid the lawsuit and might try to settle out of court. Just last week,the bank paid $85 million to settle a civil lawsuit against Wells Fargo out of court. That particular lawsuit was also related to sub-prime mortgages. According to the Huffington Post, Wells Fargo agreed to pay the amount without admitting that the bank had done anything wrong.
The Justice Department is not the only government office targeting Wells Fargo. Both Baltimore and Memphis have also filed lawsuits against Wells Fargo for “preying upon African-Americans.” The lawsuit filed in Baltimore was eventually dismissed because the judge in the case claimed that it “wasn’t plausible” that Wells Fargo had acted in such a discriminatory manner in their lending practices to the African-American community. The initial allegations brought forth were that Wells Fargo in Baltimore would specifically target black churches in the area in order to find new clients because the bank loan officers felt that they were “easy targets.”
The lawsuit against Wells Fargo in Baltimore was filed in 2008; when the New York Times first wrote about the lawsuit against Wells Fargo, the newspaper did an analysis of sub-prime mortgages in New York City. More sub-prime loans with excessively high interest rates were given to African-Americans than other races with even lower incomes. The disparity in loans also extended to other nationalities: From the New York Times:
“We’ve known that African-Americans and Latinos are getting subprime loans while whites of the same credit profile are getting the lower-cost loans,” said Eric Halperin, director of the Washington office of the Center for Responsible Lending. “The question has been why, and the gory details of this complaint may provide an answer.”
The NYT also found that the racism in the sub-prime mortgage rates was slightly higher among Well’s Fargo customers than customers taking loans from other banks in New York City. Well’s Fargo largely escaped the wrath of the feds for a while in the sub-prime mortgage investigations, but their reputation seems to be a bit tarnished now.
It’s nice to see that the Justice Department is taking an active role in investigating banks for unfair practices after the devastation the sub-prime mortgage crisis caused in the United States.