By now we are all aware of the predatory lending practices
of the banks during the housing boom of the last decade. African
Americans and Latinos were disproportionately targeted during the boom,
and although some restitution is starting to occur, it is not nearly
enough to cover the losses within the black community.
The worst part of this practice is that
institutional racism based on corrupt real estate practices existed
many years before the boom and continue to exist even after the housing
collapse. Here are two examples:
Mortgage Redlining:
A lending policy for denying real estate loans on properties in older,
changing urban areas, usually with large minority populations, because
of alleged higher lending risks without due consideration being given by
the lending institutions to the credit worthiness of the individual
loan applicant.
Blockbusting:
The practice on the part of unscrupulous speculators or real estate
agents of inducing panic selling of homes below market value especially
by exploiting the prejudices of property owners in neighborhoods in
which the racial make-up is changing or appears to be on the verge of
changing. It is an actionable wrong.
Apparently, our Congress transferred its lawmaker authority to the Federal Reserve Bank for 'policing' itself? Financial Institution Regulations, Redlining and Mortgage Markets
Whew! No jail time.
Monday, July 16, 2012
John Stumpf, president of Wells Fargo since 2005
Wells Fargo, the nation’s largest mortgage lender, cheated at least 34,000 minority homeowners during the 2004-2008 housing boom, either charging them more for their mortgages or steering them into risky loans. For these acts of discrimination the bank has agreed to pay a penalty of $175 million, while not admitting any wrongdoing.
Out of the $175 million settlement, the bank will pay $125 million to the black and Hispanic individuals who were victimized by Wells Fargo’s racist lending practices. The other $50 million will go towards direct down payment assistance to borrowers in communities that were hit hard by the housing crisis and disproportionately impacted by the bank’s discriminatory loans.
The U.S. Department of Justice said it went after Wells Fargo after finding it had conned black and Hispanic borrowers into paying more than white homeowners—“not based on borrower risk, but because of their race or national origin.”
Using a practice known as “steering,” Wells Fargo gave 4,000 African-Americans and Hispanics subprime mortgages even when they qualified for prime loans.
Mike Heid, president of Wells Fargo Home Mortgage, told The New York Times that the bank agreed to settle the case “because we believe it is in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight, and to instead devote our resources to continuing to contribute to the country’s housing recovery.”
The settlement awaits final approval by a federal judge.
The Wells Fargo case follows another involving Bank of America, which agreed late last year to pay $335 million to resolve similar charges against Countrywide, which it acquired in 2008.
-Noel Brinkerhoff
To Learn More:
Justice Department Reaches Settlement with Wells Fargo Resulting in More Than $175 Million in Relief for Homeowners to Resolve Fair Lending Claims (U.S. Department of Justice)
Higher Rates for Blacks and Hispanics? (by Janet Paskin, Wall Street Journal)
Wells Fargo Will Settle Mortgage Bias Charges (by Charlie Savage, New York Times)
Wells Fargo and a Foreclosure Suicide (by Noel Brinkerhoff and Vicki Baker, AllGov)
Wells Fargo Sued for Allowing Foreclosed Homes in Non-White Areas to Fall into Disrepair (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Source: AllGov - News - Wells Fargo Gets Away with $175 Million Penalty for Racist Lending Practices
