On May 15, 2017, the City of Philadelphia filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania against Wells Fargo Bank. Karl Heideck explains the circumstances around the recent lawsuit brought by the city of Philadelphia, against Wells Fargo Bank. Philadelphia has alleged that Wells Fargo Bank violated the Fair Housing Act of 1968 practicing predatory lending by giving high interest high risk loans to its African American and Hispanic borrowers.
According to the plaintiff, the city of Philadelphia, Wells Fargo steered Black and Hispanic borrowers with good credit to higher interest rate and riskier loans than what they qualified to receive. The city also says that the bank then made it difficult for those borrowers to refinance those same loans later, forcing many of them into foreclosure. These findings were substantiated by a year’s worth of research. After reviewing records covering a ten year period (2004-2014), it was discovered that Wells Fargo had given blacks higher interest loans twice as often as whites with the same credit rating. All the borrowers had a 660 FICO score. Hispanics were given higher interest rate, riskier loans 1.7 times more often than whites.
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Philadelphia alleges that these discriminatory practices led to minority neighborhood blight due to the high foreclosure rates. Their records indicated that minority owned homes were 4.7 times more likely to be foreclosed than home in predominantly white neighborhoods. Philadelphia is asking for an injunction against the bank forcing it to stop its discriminatory practices and unspecified monetary damages.
This lawsuit follows a ruling by the Supreme Court that allows Miami to sue Wells Fargo and Bank of America under the Fair Housing Act. Philadelphia will be the second city lining up to sue Wells Fargo. And, Wells Fargo is still reeling after last year’s unveiling of falsified bank accounts that were opened by bank employees to ensure that sales goals were met. Philadelphia is within its rights to sue considering that 43% of its 1.7 million residents are African American and according to a 2010 census 12% are Hispanic.
A large percentage of its population may have been negatively affected by the redlining practices of Wells Fargo Bank. Redlining is the constitutionally prohibited practice of drawing a red line around districts where loans are not desired due to ethnicity or race. This is what Philadelphia believes Wells Fargo did when assigning loans to Philadelphia’s minority home buyers. The only time redlining is allowed is around properties in flood plains.
Wells Fargo is fighting the allegations pointing to their 140 history. They claim that the City of Philadelphia’s allegations are unsubstantiated. Karl Heideck, an attorney at Grant & Eisenhower PA reviews complex banking litigation and securities fraud cases, has noted the major details of this pending case. When the case is decided, we’ll see if Wells Fargo was truly guilty of discriminatory lending practices in Philadelphia, PA.
Learn more about Karl Heideck: http://thereisnoconsensus.com/career-spotlight-litigation-karl-heideck/