Wells Fargo Sued For Racist Lending Practices

Actually, Wells Fargo has been getting sued quite a lot. First the NAACP, then Baltimore, and now Illinois.

The New York Times has some statements from former Wells Fargo employees, describing how the system works. Some of the details are jaw-dropping:

Wells Fargo, Ms. Jacobson said in an interview, saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. 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.”

“We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.” [...]

Mr. Paschal, who is black and worked as a loan officer in Wells Fargo’s office in Annandale, Va., from 1997 to 2007, offers a sort of primer on Wells Fargo’s subprime marketing strategy by race.

In 2001, he states in his affidavit, Wells Fargo created a unit in the mid-Atlantic region to push expensive refinancing loans on black customers, particularly those living in Baltimore, southeast Washington and Prince George’s County, Md. [...]

“They referred to subprime loans made in minority communities as ghetto loans and minority customers as ‘those people have bad credit’, ‘those people don’t pay their bills’ and ‘mud people,’ ” Mr. Paschal said in his affidavit. [...]

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.
One example given: Loan officers would falsely claim that Black borrowers had declined to provide documentation of their income, which “flipped” the loan from prime to subprime.

As The Chicago Reporter Blog points out, Wells Fargo isn’t alone. Throughout the industry, Blacks get loans on worse terms than whites with lower earnings.

Wells Fargo is not the only lender giving high-cost loans more often to its highest-earning black customers. Nationwide, African Americans earning more than $300,000 were more likely to get high-cost loans than Asian, Latino and white borrowers earning less than $40,000, according to a Reporter analysis last November.

While income may not accurately reflect credit worthiness, fair lending advocates often point to the racial disparities between wealthy blacks and lower-income individuals of other races and ethnicities as red flags.
I hope these suits encourage a lot of other attorney generals to go rooting through records for evidence of lending racism.

* * *

One thing to keep in mind: It’s not like the lending market just suddenly turned racist now. It’s been like this all along; it’s just that sub-prime lending has made it especially evident.