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VOL. 124 | NO. 256 | Thursday, December 31, 2009

Mortgage Lending Lawsuit Names Wells Fargo

W-F Denies Discrimination

By Andy Meek

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Memphis and Shelby County fired the opening salvo Wednesday in what is expected to be a protracted, high-profile court battle against Wells Fargo over allegedly unscrupulous mortgage lending practices.

Against the backdrop of the National Civil Rights Museum and flanked by attorneys whose firm already has sued Wells Fargo for the same thing elsewhere, city and county leaders announced the filing of a federal lawsuit against the lender. The federal suit alleges “unlawful, irresponsible, unfair, deceptive and discriminatory mortgage lending in Memphis and Shelby County.”

Wells Fargo responded in a statement provided to The Daily News.

"While we have not had an opportunity to review the specifics of the suit, the allegations referenced in earlier news reports about Wells Fargo's lending practices are baseless and inaccurate," the statement reads. "Other courts have found similar suits against lenders to be without merit, and we are confident of a similar outcome here.

"We believe communities are ultimately better served when elected officials and lenders work collaboratively to address the current economic issues facing our neighbors. To that end, we remain committed to our customers in Memphis and Shelby County, and proud of our lengthy record leading the industry in fair and responsible lending practices and in support of the communities we serve."

City and county leaders decided about a year ago to drag into court national lenders whose practices – like pushing high-cost loans in minority communities – may have worsened the area’s foreclosure problem.

Wells Fargo was the original lender associated with 114 residential mortgages for single-family homes foreclosed on in 2009, according to real estate information company Chandler Reports, www.chandlerreports.com. That represents about 3 percent of all foreclosures in 2009, and that number is about 25 percent of Wells Fargo’s purchase mortgage activity for Shelby County in 2009.

Two weeks ago, the Memphis City Council endorsed a Washington D.C.-based law firm’s involvement in the suit after the original outside firm chosen for the task decided for internal reasons to step away. Replacing the first law firm, Montgomery, Ala.-based Beasley, Allen, Crow, Methvin, Portis & Miles PC, was one of the last details to lock down before filing suit.

The new outside firm that will represent the city and county is Relman & Dane PLLC, a firm that also represents the city of Baltimore in its closely watched suit against Wells Fargo over discriminatory lending.

Both local governments have been poised for weeks to finally cross the legal Rubicon and seek damages against any lender named in the suit as well as an injunction that temporarily stops foreclosures.

Memphis and Shelby County governments have agreed to split expenses associated with expert witness fees and other costs of pursuing a lawsuit. Each government would pay up to $125,000.

So many homes are lost each year in Memphis to foreclosure sales that occur on the Shelby County Courthouse steps that the problem attracted national attention this year. A film crew for the PBS television show “NOW with David Brancaccio” came to Memphis and studied the problem, talked to politicians such as Shelby County Mayor A C Wharton Jr. and even ventured out to foreclosure hotspots like Frayser.

When Brancaccio asked Wharton what the impending mortgage lending lawsuit would accuse banks of, Wharton answered, according to a transcript of his remarks: “Extending credit in many instances in which they knew full well that you were doomed to fail. Taking advantage of ill-informed people with a low level of financial literacy.

“They knew that. Keep in mind – the people working in these banks go to school. They’re trained. They learn how to do this. So they knew what they were doing. They would do it because it’s ‘Get the money quickly, turn it over, get it off of your books. Get it onto somebody else’s books. And it blends in and nobody knows who – knows who’s going to take the loss on it.”

PROPERTY SALES 91 293 13,051
MORTGAGES 58 168 8,171
BUILDING PERMITS 99 744 30,678
BANKRUPTCIES 34 156 6,220