Wells Fargo Accused of Driving Bank Owned Foreclosures

by Donald Hanz on Foreclosure Crisis, Wells Fargo Foreclosures

Another lawsuit has been filed against Wells Fargo for its role in subprime lending and bank owned foreclosures crisis. The city of Baltimore, Maryland has filed a lawsuit against Wells Fargo for instigating the subprime mortgage lending in the black community which led to thousands of homeowners facing bank owned foreclosures.

Some former Wells Fargo loan officers have testified against the bank’s policy of focusing its subprime lending operation in black communities.

In her testimony, loan officer Beth Jacobson said that Wells Fargo systematically singled out black homeowners in Baltimore and suburban communities in Maryland for subprime mortgages with high interest rates.

According to officials in Baltimore, subprime loans have caused thousands of homeowners to lose their homes to foreclosures and cost the city millions of lost taxes and revenues.

Jacobson pointed out Wells Fargo considered the black community as a fertile ground for its subprime lending operation because black families were desperate to become homeowners. She recalled that Wells Fargo loan officers encouraged black customers to take out subprime loans when they could have been eligible for prime loans.

Another loan officer Tony Paschal testified that Wells Fargo employees used to call black borrowers as mud people and to refer to subprime mortgages as ghetto loans.

Jacobson, who used to be the number one subprime loan officer nationwide, disclosed that Wells Fargo had operated an emerging-markets unit that targeted black churches. She added that the bank believed that church leaders had a considerable influence over its congregation and they could convince them to avail of subprime loan mortgage.

Data released by the city showed the extent of the damage caused by subprime lending on the housing market in Baltimore, with more than 50 percent of properties taken out on a Wells Fargo mortgage from 2005 to 2008 facing foreclosures and are now vacant. And the worst is, 71 percent of these foreclosed properties are located in black neighborhoods.

Meanwhile, Federal District Court’s Judge Benson E. Legg is still undecided whether the lawsuit filed by the city has merits to progress. He asked the city to submit and file additional paperwork.

On the other hand, both Jacobsen and Paschal claimed that Wells Fargo had given loan officers bonuses each time they refer a borrower who was eligible for prime loan to the subprime lending division.

On her part, Jacobsen said that for a year, she received a total of $700,000 and had traveled to several resorts across the country courtesy of Wells Fargo.