All Articles Tagged "discriminatory lending"
Discriminatory Lending Lands Wells Fargo in Hot Seat
By Charlotte Young
Between the city of Baltimore, the Federal Reserve and the Department of Justice, Wells Fargo is feeling the heat for alleged discriminatory practices against borrowers, which played a major role in the financial crisis.
Most recently the DOJ is taking on the nation’s largest home mortgage lender, claiming the company deliberately sought out and took advantage of African American borrowers during the housing bubble, and led them to high-cost, subprime loans.
Huffington Post reports that the DOJ’s actions are part of its efforts to toughen up on the actions of major mortgage firms during the financial crisis. Its fair lending unit has opened about 60 matters and has more than 15 ongoing investigations.
The Federal Reserve has also taken public action against Wells Fargo. Last week, the Fed alleged that more than 10,000 borrowers were incorrectly guided towards subprime mortgage loans or were subject to loan document falsification by bank personnel.
In a separate lawsuit filed by Baltimore, the city accuses the company of “reverse redlining,” the practice of guiding black borrowers in majority black areas to high cost mortgage loans. The city maintains that they did this knowing the borrowers would default on their loans, but unafraid of the consequences as Wells Fargo had sold those loans to investors.
The Department of Housing and Urban Development is also conducting private audits of Wells Fargo and four other companies. The five companies stand accused of defrauding taxpayers in its dealing of foreclosures and government-backed loan home purchases.
Wells Fargo still admits no wrongdoing in any of the allegations.
“We have a very strong commitment to serving all customers along the credit spectrum, and we do so without bias,” Vickee Adams, spokeswoman for Wells Fargo told the Huffington Post. “That’s the type of responsible lending that we practice.”
Prior to the recent probes, Wells Fargo was seen by most as the most “innocent” of mortgage lenders. Its executives even escaped the heated public questioning from the Financial Crisis Inquiry Commission.
But now, its clean and guiltless image is quickly fading.
Already Wells Fargo has negotiated and consented to pay $85 million in civil charges for the Fed’s accusations, in hopes to settle these accusations without a public lawsuit. In the allegations brought on both the state and federal level, the negotiations could cost the company billions.
Millions in Settlements Show Pattern of Racist Lending
(NNPA) — In recent months a series of settlements by the federal Department of Justice signal that charges of discriminatory lending not only have validity; but occur with amazing similarity in different locales. In the past week, a lawsuit against mortgage lending practices in the St. Louis metropolitan area ended with a $1.45 million settlement to resolve charges of discriminatory patterns and practices. Midwest Bank Centre agreed to open a full-service branch in a majority African-American area of the metro. Additionally other terms of the settlement call for $900,000 to increase the amount of lending to majority African-American neighborhoods;$300,000 for consumer education and credit repair programs; and $250,000 for outreach to promote their products and services to prospective customers.
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Discriminatory Lending Plagues Minority Business
(MDBA) — Capital access remains the most important factor limiting the establishment, expansion and growth of minority-owned businesses. Given this well established constraint, the current financial environment has placed a greater burden on minority entrepreneurs who are trying to keep their businesses thriving in today’s economy. In this study, Dr. Robert W. Fairlie and Dr. Alicia Robb provide an in-depth review and analysis of the barriers to capital access experienced by minority entrepreneurs, and the consequences that limited financial sources are placing on expanding minority-owned firms. Minority-owned businesses have been growing in number of firms, gross receipts, and paid employment, at a faster pace than non-minority firms. If it were not for the employment growth created by minority firms, American firms, excluding publicly-held firms, would have experienced a greater job loss between 1997 and 2002. While paid employment grew by 4 percent among minority-owned firms, it declined by 7 percent among non-minority firms during this period.
Gov't on the Hunt for Redlining
(Businessweek) — Community activists in St. Louis became concerned a couple of years ago that local banks weren’t offering credit to the city’s poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators. Apparently, someone in Washington took notice. The Federal Reserve has cited one of the group’s targets, Midwest BankCentre, a small bank that has been operating in St. Louis’s predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas. Although executives at the bank say they don’t discriminate, Midwest BankCentre’s latest annual report says it is in the process of negotiating a settlement with the U.S. Justice Dept. over its lending practices. Lawyers and bank consultants say regulators and the Obama Administration are scrutinizing financial institutions for a practice that last drew attention before the rise of subprime lending: redlining.
