There’s More to Answer for in the Wells Fargo Subprime Suits
Now that commentator and PBS talk show host Tavis Smiley has severed his ties to Wells Fargo & Co., what about the bank itself? As Smiley noted in his decision to cut business ties with Wells, the bank is facing several lawsuits charging that it engaged in illegal discriminatory lending practices by allegedly selling high-cost subprime loans primarily to minority borrowers.
The bank has denied all the charges, and has said it will strongly fight the lawsuits.
There’s a lot for the bank to answer to. Here’s a bit more from the suit by Illinois Attorney General Lisa Madigan, regarding the bank’s marketing tactics:
As part of Wells Fargo Home Mortgage’s marketing plan, Wells Fargo Home Mortgage utilized a computer function that purportedly permitted employees to customize Wells Fargo marketing materials to target African Americans by choosing “African American” in a pull down menu of “language” options.
If that’s true, it’s certainly a creative use of language options by the Wells’ marketing people.
And the end result of all these efforts, according to Madigan?
The lawsuit also follows a recent Chicago Reporter analysis of mortgage data submitted by Wells Fargo to the federal government. That study found that, in 2007, Wells Fargo sold high-cost, subprime loans more often to its highest-earning African-American borrowers in Chicago than to its lowest-earning white borrowers. According to the study, in 2007, about 34 percent of African Americans earning $120,000 or more received high cost mortgages from Wells Fargo in the Chicago metro area, while less than 22 percent of white borrowers earning less than $40,000 received high-cost mortgages from the lender.
So … a black borrower making more than $100,000 could be more likely than a white borrower earning, say, $35,000 to get a subprime loan? No wonder the lawsuits against Wells are flying.
The point about the suit in Illinois, and a similar suit filed by the city of Baltimore against Wells, is that all these subprime loans took a huge toll on minority neighborhoods, and devastated the cities themselves. These are dramatic, even unprecedented charges — that a major U.S. lender, a recipient of $25 billion in government bailout money, caused lasting damage to some major American cities by deliberately targeting minority neighborhoods for risky high-cost loans. The cities are suing Wells to recover money to fix the mess that remains in neighborhoods wrecked by foreclosures.
Now Smiley has distanced himself from Wells, and teaming up with the bank for “Wealth Building” seminars won’t be on his agenda again.
But what about the rest of it? If the bank’s lending practices were fair and beyond reproach, as the bank maintains, then what happened? Why are black and Hispanic communities in some cities crumbling under the weight of so many subprime foreclosures?
Smiley may have left the stage. But that still hasn’t answered all the questions regarding Wells Fargo, subprime loans and the broken neighborhoods left behind.