The city of Philadelphia filed a suit against Wells Fargo and Co. on May 15th, 2017, stating that they had violated the Fair Housing Act of 1968. Karl Heideck, an attorney with Grant & Eisenhower PA law firm, explains the allegations and the ongoing problems with Wells Fargo.
The city of Philadelphia stated that the San Francisco based Wells Fargo Bank has steered Hispanic and African American borrowers towards loans that have higher interest rates even when they should have qualified for mortgages that had lower interest and lower risk. They further allege that the bank has made it more difficult for these borrowers to then refinance their mortgages, which has led to a higher rate of foreclosure in these populations when compared to Caucasian borrowers.
The city of Philadelphia investigated these claims for a year before filing, utilizing data from the last ten years. They found that African American borrowers were more than twice as likely to receive higher interest loans when compared to Caucasian borrowers while Hispanics were 1.7 times more likely to be offered risky loans. These comparisons were drawn from borrowers who all had a FICO score of 660 or higher.
This process is called redlining, which is a discriminatory practice that dates back to the 1930’s that is now illegal. Banks used to draw red lines around different neighborhoods that they didn’t want to extend loans to, usually due to a number of minorities that were living in this neighborhood. In this case, Wells Fargo is alleged to have denied lower interest loans to borrowers due to their race or the neighborhood that the borrower lived in.
This lawsuit is another huge blow to Wells Fargo. The bank is still trying to recover from a scandal in 2016 where bankers were creating fake accounts so that they could meet their sales goals. The bank is fighting these current allegations, stating that they are unsubstantiated. Wells Fargo has not yet filed a written legal response to the complaint or the city’s request for monetary damages of an unspecified amount as well as an injunction against Wells Fargo to stop them from following discriminatory lending practices.
About Karl Heideck
Karl Heideck has over ten years of practice throughout Philadelphia, previously working as a project attorney on behalf of Pepper Hamilton LLP as well as holding an associate position at Conrad O’Brien. Heideck then graduated with honor from the Temple University Beasley School of Law with his Juris Doctor in 2009 before entering professional practices.
Karl Heideck has previously focused his legal practice on risk management, civil litigation, and compliance and currently serves clients throughout the Philadelphia area. He now focuses on risk management, liquidity, acquisitions and transactional issues related to the 2008 mortgage crisis at Grant & Eisenhower PA.