The New York Times has an article detailing the alleged practices used by Wells Fargo to steer African-Americans into sub-prime mortgages. The article relies on the affidavit testimony of two former Wells Fargo loan officers from an ongoing discrimination lawsuit between the City of Baltimore and Wells Fargo. According to the affidavits quoted in the article, Wells Fargo employees commonly referred to sub-prime loans as “ghetto loans” and blacks were referred to as “mud people” and other derogatory racial slurs. The employees’ testimony also details the unfair and deceptive tactics used by Wells Fargo to place African-American loan applicants into sub-prime loans, even when the prospective borrower could have qualified for a prime loan. There is further testimony about how Wells Fargo targeted African-American church leaders to help steer their congregations to Wells Fargo mortgages and how Wells Fargo recruited African-American loan officers specifically to work with potential African-American borrowers. If you’re interested in reading the full text of the affidavits, the Consumerist has a link to them here.
Many observers have long suspected that minorities were unfairly targeted by sub-prime lenders. The affidavit testimony of these two former Wells Fargo employees strongly corroborates this suspicion. The alleged practices of Wells Fargo are appalling, and if proven to be true, Wells Fargo deserves the maximum penalty available.
(photo: Steve Rhodes)
The Minneapolis Star-Tribune has a story today about the shifting demographics in the wave of foreclosures that have hit Minnesota. In a report to be released today, half of the people seeking foreclosure counseling from the Minnesota Home Ownership Center, a leading foreclosure counseling organization, held prime, not sub-prime, mortgages. Approximately half of those people cited job loss as the primary factor for the foreclosure. This shift is also evident on the national level. According to one study cited in the story, the national delinquency rate for prime mortgages increased from 4.34 percent to 5.06 percent in the fourth quarter of 2008.
One of the myths of the foreclosure crisis is that it is being fueled by reckless sub-prime buyers, who bought houses they knew they couldn’t afford. But the Minnesota Home Ownership Center study, as well as statistical trends on the national level, seem to indicate that job loss, rather than reckless borrowing, may be a more relevant factor. The Star-Tribune story quoted Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. Anderson notes that the new wave of people unable to pay the mortgage often is middle-class families that most likely have two incomes. One loses a job and all of a sudden they can’t afford their house. Or they are under water on their mortgage and can’t refinance. ”As this recession has intensified, the face of this mortgage crisis has changed by 180 degrees,” said Anderson.
If you live in Minnesota and are facing foreclosure, please contact me for a free case evaluation.
(photo: Michael Slatoff)