Baltimore Suing Subprime Lender for Targeting Minorities
By Foreclosure-Fighter staff writer
There seems to be no end in sight for the national foreclosure crisis, and homeowners continue to default on loans and find themselves without a place to live. The good news? Local politicians are taking the sad state of the U.S. housing market as a call to action.
Reports from NPR News indicate that Baltimore City Mayor Sheila Dixon has filed a lawsuit against Wells Fargo Bank, one of the two main home lenders in the Baltimore area. The suit alleges that the bank targeted minority borrowers with predatory lending practices, and seeks to recover damages caused by the city's high foreclosure rate.
According to the Baltimore Sun, an investigation by the city's leadership found that black borrowers in Baltimore were offered high-rate loans 65% of the time, while high-rate loans for white borrowers accounted for only 15% of the total. Additionally, foreclosure rates among Baltimore's blacks are evidently nearly four times those in the white community.
The information gathered by Ms. Dixon's investigation team also apparently suggests that even among blacks who had traditional, fixed-rate mortgages, foreclosure rates were higher than among whites with similar loans.
Mayor Dixon has reportedly accused Wells Fargo of originating loans with high costs or high fees more often to minorities than to whites. This practice marks an interesting turnaround from related problems the city faced years ago.
Sources indicate that, once upon a time, lenders were suspected of "redlining," or refusing loans to borrowers based on race or ethnicity. Today, experts have found that minorities are often targeted by subprime lending strategies, and have dubbed the new problem "reverse redlining."
Baltimore leaders have good reason to be angry: besides the pain and suffering the foreclosure crisis is causing their constituents, the city has allegedly lost millions of dollars in unpaid property taxes and lost public investment.
Though Mayor Dixon has not requested a specific monetary amount in her suit, sources indicate that she hopes to recover some of the damages her voters and her city have suffered.
Reports suggest that many of the Baltimore neighborhoods hit hardest by the foreclosure crisis were among the city's poorest. But the practice of lending to individuals with low incomes is by no means new – payday loan stores and microlenders the world over have learned how lucrative it can be.
Often, individuals with shaky or limited credit histories have limited options for getting loans, and are willing to pay exorbitant interest rates for the privilege of borrowing money.
But responsible lenders and underwriters are traditionally expected to lend money only to those who can reasonably be expected to repay. Unfortunately, that standard was deserted in most of the country, and the current foreclosure crisis is part of the aftermath.