Tuesday, January 15, 2008
The Subprime Story Continues: Charm City v. Wells Fargo Bank
The City of Baltimore has filed a complaint in federal district court against Wells Fargo Bank alleging that the bank deliberately lured black homebuyers into high-cost, subprime loans in violation of the the federal Fair Housing Act of 1968. The City of Baltimore claims that Wells Fargo's "reverse redlining" caused "severe economic damage" to the city including lost property tax revenue, expenses for increased fire protection, and "significant administrative and legal costs." The Baltimore Sun reports that city officials hope to recover "tens of millions" of dollars from Wells Fargo, which the city could "funnel into public programs to aid homeowners." The New York Times reports that the Baltimore case may be the first of a series of cases by municipalities facing falling revenue and rising costs associated with abandoned property and the problems that come with it like arson, drug use and prostitution.
According to the complaint, Wells Fargo has been the first or second largest provider of home mortgage loans in Baltimore since 2004. Between 2004 and 2006, Wells Fargo made more than 1,285 loans per year on more than $600 million in property value. A Wells Fargo spokesperson has denied the allegations.