Lisa Simpson
Jan 20,2010
In: Foreclosures

Baltimore is Having a Tough time to Prove its Allegations Against Wells Fargo

Wells Fargo strongly refutes charges and the basis for the city of Baltimore calculating its losses.

Baltimore is going through a tough time trying to prove its allegations of discriminatory lending practices against Wells Fargo. Baltimore City however deserves some more time quantify its charges.

Some alarming evidence has been found by Baltimore City to substantiate the charges it has made in the legal suit against Wells Fargo. Baltimore contends that this lender, based in California has navigated the Black mortgage applicants intentionally into sub-prime loans, despite the fact that they were eligible for cheaper mortgage loans.

The city has depositions from persons who were former employees of the bank. They have described how rampant these discriminatory operations were. They alleged that their former employee encouraged them to grant loans to Afro-American borrowers at high interest rates – knowing fully well that they could never repay the same. This led to the devastating number of defaults.
The city’s allegation is that these huge numbers of foreclosure led to the city suffering and incurring financial losses. A private legal firm is representing Baltimore City. It is arguing that these biased practices were the cause of increased foreclosures that caused for neighbourhood blight, brought down real estate prices and hence property taxes. It also led to pressure of work on the police and fire fighting departments because of criminal activities and arson in the abandoned houses. The city estimates that the damages could run into millions.

Wells Fargo strongly refutes these charges and the basis for the city calculating its losses. The presiding judge, J. Fredrick Motz appears to be sympathetic towards the bank as regards the calculation of damages.

Baltimore City has located 401 foreclosures initiated by Wells Fargo in Baltimore covering 3 years. Of these 230 were empty at some point of time. Half are currently vacant. Motz stated that there are 30,000 vacant units and this makes it problematic to calculate the impact of a specified number of some hundreds.
The point raised by the judge cannot be ignored. The case would have been simpler if it had been brought by the suffering house owners seeking the damages on their own financial position. It would also have been easier if the case had been initiated by HUD trying to stop discriminatory dealings. But Baltimore City has miles to go before it can prove that it has been wronged willfully in a direct quantifiable way. The same types of lawsuits brought by other cities have been dismissed.