Illinois AG Sues Wells Fargo For Targeting Minorities

Posted by Orb Staff on August 03, 2009 No Comments
Categories : Residential Mortgage

is Attorney General [link=http://www.illinoisattorneygeneral.gov/pressroom/2009_07/20090731.html][u]Lisa Madigan[/u][/link] has filed a lawsuit in Cook County Circuit Court against Wells Fargo, accusing the company of discriminatory lending. According to Madigan's charges, Wells Fargo illegally discriminated against African-American and Latino homeowners by selling them high-cost subprime mortgage loans, while white borrowers with similar incomes received lower-cost loans. Madigan says Wells Fargo turned Chicago's predominantly African-American and Latino neighborhoods into "ground zero for subprime lending." The lawsuit, which is the result of an investigation into possible violations of fair lending and consumer fraud laws, cites marked disparities in Wells Fargo's lending data. According to an analysis of Chicago-area data, in 2005, approximately 45% of Wells Fargo's African-American borrowers and 23% of its Latino borrowers received a high-cost mortgage. That same year, only about 11% of the lender's white borrowers received high-cost mortgages. In 2006, approximately 58.5% of Wells Fargo's African-American borrowers and 35% of its Latino borrowers in the Chicago area received high-cost mortgages, compared with 16% of white borrowers. In 2007, approximately 49% of the lender's African-American borrowers and 25% of its Latino borrowers in the area were sold a high-cost loan, compared with 15% of white borrowers. The lawsuit also follows a recent Chicago Reporter analysis of mortgage data submitted by Wells Fargo to the federal government. That study found that Wells Fargo sold high-cost, subprime loans more often to its highest-earning African-American borrowers in Chicago than to its lowest-earning white borrowers in 2007. According to the study, about 34% of African Americans earning $120,000 or more received high-cost mortgages from Wells Fargo in the Chicago metro area in 2007, while less than 22% of white borrowers earning less than $40,000 received high-cost mortgages from the lender. "These disparities indicate that something is very wrong with Wells Fargo's mortgage lending," says Madigan. "They strongly suggest that the predictor of whether a borrower would receive a high-cost home loan from Wells Fargo was race, not income." Wells Fargo's discretionary policies included a compensation structure that rewarded employees for placing borrowers into high-cost mortgages, Madigan says. Her complaint also alleges that Wells Fargo targeted African-American borrowers for the sale of high-cost loans by hosting a series of "wealth building" seminars in cities throughout the country, including Chicago. Additionally, the lawsuit alleges that Wells Fargo Financial Illinois, a Wells Fargo subsidiary that primarily originated subprime loans, engaged in unfair and deceptive business practices by misleading Illinois borrowers about their mortgage terms, misrepresenting the benefits of refinancing and repeatedly refinancing loans without any real benefit to consumers. SOURCE: [link=http://www.illinoisattorneygeneral.gov]Office of Attorney General Lisa Madigan

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