A lawsuit filed by Illinois Attorney General Lisa Madigan against mega-bank Wells Fargo got the green light today from a state court judge.
The suit, which was originally filed in the summer of 2009, alleges that Wells Fargo engaged in numerous instances of racially-themed predatory lending throughout the state. The case is the first state’s attorney case on fair lending to reach discovery, which means the case can now go to trial.
“As a result of its discriminatory and illegal mortgage lending practices, Wells Fargo transformed our cities’ predominantly African-American and Latino neighborhoods into ground zero for subprime lending,” Madigan said in a press release about the original filing. “The dreams of many hardworking families have ended in foreclosure due to Wells Fargo’s illegal and unfair conduct.”
Madigan’s lawsuit is filled with data and analysis on Wells Fargo’s lending practices. For instance, in 2005, 45 percent of the bank’s black borrowers received high-cost, dangerous mortgages, as did 23 percent of latino borrowers; only 11 percent of white borrowers, however, received similar mortgages. The trend continued the next two years, with 58.5 percent of black borrowers and 35 percent of latino borrowers receiving the risky loans in 2006, and 49 percent and 25 percent in 2007 – compared with 16 and 15 percent of white borrowers.
Even more troubling was the income related data that Madigan uncovered. In 2007, 34 percent of blacks earning $120,000 or more received high-cost mortgages, compared to the 22 percent of white borrowers earning less than $40,000 who received the same mortgages.
Madigan said that the data suggests one thing – that race was a factor in Wells Fargo’s loan operation.
“These disparities indicate that something is very wrong with Wells Fargo’s mortgage lending,” Madigan said. ”They strongly suggest that the predictor of whether a borrower would receive a high-cost home loan from Wells Fargo was race, not income.”
The lawsuit also alleges that not only was Wells Fargo deliberate with its discriminatory loans, but deceptive as well. Through misleading borrowers, misrepresenting the benefits of various financial products, and utilizing deceptive mailings and advertisements, Wells Fargo was able to fool borrowers into doing business with Wells Fargo Financial, the bank’s subprime lender, and not Wells Fargo Home Mortgage, its prime lender.
And the effects of Wells Fargo’s actions, Madigan says, are still be felt today.
“By targeting African-American’s for the sale of its highest-cost and riskiest loans, Wells Fargo drained wealth from families and neighborhoods and added to the stockpile of boarded-up homes that are an open invitation to criminals,” Madigan said.
At the time of the press release’s filing, Illinois had seen 69,000 foreclosure filings in the first half of 2009, which was a 30 percent increase from 2008. Cook County alone was expected to surpass 52,000 filings by the year’s end. And as Chicago Agent reported recently, the situation is not much better in 2011.