Posted under Economy
The collapse of the sub-prime mortgage industry is a major cause of the current economic recession. In many instances, these loans went bad because it enabled people to purchase homes they could not afford.
But now, a new law suit alleges that, in Baltimore, Wells Fargo systematically pushed African-American customers into sub-prime mortgages even when they qualified for a prime loan. The New York Times has the story:
As she describes it, Beth Jacobson and her fellow loan officers at Wells Fargo Bank “rode the stagecoach from hell” for a decade, systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages.
These loans, Baltimore officials have claimed in a federal lawsuit against Wells Fargo, tipped hundreds of homeowners into foreclosure and cost the city tens of millions of dollars in taxes and city services…Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”
…Both loan officers said the bank had given bonuses to loan officers who referred borrowers who should have qualified for a prime loan to the subprime division.
Many of the individuals who were pushed into these loans may have been able to avoid foreclosure if they were offered the prime loans for which they were qualified. A sub-prime loan on a typical $165,000 mortgage “adds more than $100,000 in interest payments.”
Wells Fargo received $25 billion from taxpayers so that it could remain adequately capitalized despite holding “troubled assets,” particularly subprime loans.
Read more coverage of the story in the Baltimore Sun and the Maryland Daily Record.
3 Responses to “Wells Fargo Accused of Pushing African Americans Into Subprime Loans”
Eye On Annapolis on 07 Jun 2009 at 12:23 pm #
Sort of brings the term “predatory lending” full circle.
Bailed Out Bank Accused Of Intentionally Steering Minorities Toward Subprime Loans on 10 Jun 2009 at 11:43 am #
[...] individuals who were pushed into these loans may have been able to avoid foreclosure if they were offered the prime loans for which they were [...]
Henry on 13 Jun 2009 at 9:09 am #
This is another example of deep seated institutional racism. Conservative controlled media sources often cherry pick surface issues to sensationalize. However, this story is exposing the root cause of one problem we face in the African American community. I applaud those who are taking legal action and those who have the courage to expose it in the media.