Baltimore’s mulatto Negress mayor and City Council are suing Wells Fargo Bank, contending that its lending practices discriminated against Negro borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs.
Skip to next paragraph The recent surge in homeowner defaults nationwide, generated by lax lending practices during the real estate boom, has officials bracing for a range of problems that often accompany foreclosures. Some municipalities, including Cleveland and Buffalo, are trying to make lenders responsible for abandoned properties to ward off crimes like arson, drug use and prostitution.
But the civil suit that officials in Baltimore are filing in United States District Court may presage another type of litigation against lenders by municipalities facing shortfalls in their budgets.
In the suit, Mayor Sheila Dixon joined with the City Council to ask that the court bar Wells Fargo from charging higher fees to Negro borrowers. Many of these borrowers paid more under the bank’s subprime lending program, designed for less creditworthy consumers, and are more likely to default on their loans.
In 2006, Wells Fargo made high-cost loans, with an interest rate at least three percentage points above a federal benchmark, to 65 percent of its black customers in Baltimore and to only 15 percent of its white customers in the area, according to the lawsuit. Similarly, refinancings to black borrowers were more likely to be higher cost than to white ones and to carry prepayment penalties.
The complaint requests unspecified damages to cover the diminished property tax revenues and higher costs that the city said it had incurred. Additional costs include those for fire and police protection in hard-hit neighborhoods and expenditures to buy and rehabilitate vacant properties.
Kevin Waetke, a Wells Fargo spokesman, rejected the contention that race was a factor in the bank’s pricing of mortgage loans. “We do not tolerate illegal discrimination against or unfair treatment of any consumer,” Mr. Waetke said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly — our continued growth depends on it.”
But Suzanne Sangree, chief solicitor for the Baltimore City Law Department, said: “This wave of foreclosures in minority neighborhoods really threatens to undermine the tremendous progress the city has made in developing distressed neighborhoods and moving the city ahead economically. Wells Fargo could do a lot, as well as other banks that have engaged in similar practices, to help to curb the flood of foreclosures that the city is experiencing now.”
Half of the Wells Fargo foreclosures in 2006 occurred in census tracts with populations that were more than 80 percent black, the suit said. Meanwhile, only 16 percent of the foreclosures were found in tracts with populations that are 20 percent or less black. Figures for 2007 were similar, the city said.
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