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VOL. 126 | NO. 82 | Wednesday, April 27, 2011

Baltimore Wells Fargo Ruling Helps Local Cause

By Andy Meek

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The city of Baltimore’s mortgage discrimination lawsuit it filed three years ago against San Francisco-based Wells Fargo can go forward now that it has survived Wells’ motion to dismiss the case.

The federal judge presiding over the case published an opinion Friday that gave the green light to Baltimore’s fourth iteration of its suit.

The suit claims Wells pushed black borrowers into high-cost subprime loans and targeted homeowners for burdensome refinance and home equity loans.

The same day that opinion was published, meanwhile, lawyers representing Memphis and Shelby County government filed a copy of it in federal court in Memphis to make U.S. District Judge S. Thomas Anderson aware of the news.

They believe the Baltimore decision bolsters the same thing they’re trying to prove here.

On substance, there’s barely any daylight between the two lawsuits. Both allege similar claims against Wells and frame their arguments in nearly identical ways.

The lawsuit on behalf of Memphis and Shelby County governments even relies on lawyers from the same Washington-based firm of Relman, Dane & Colfax PLLC.

Webb Brewer, one of the local attorneys representing the city and county against Wells, said Baltimore U.S. District Judge J. Frederick Motz recognized Baltimore had sufficiently pled facts to proceed with respect to two property-specific situations.

One involves black borrowers who lost a home because of being put into “risky, high-cost subprime loans” where a qualification for prime loans existed. The second group involves black borrowers who lost a home because of being given a bad equity loan.

“Based upon what we know from public data, anecdotally and what we’ve been told by former employees, if Judge Anderson follows the rationale used by Judge Motz and we are allowed to go forward with discovery, we believe we can identify thousands of loans that went to foreclosure within these groups,” Brewer said. “Many of these foreclosures have remained vacant, for long periods at a high cost to the local governments.”

In his ruling, Motz said Wells is still free to assert any defenses to Baltimore’s claims in a motion for summary judgment on the case.

“Our team members make loan pricing decisions based on credit and transaction risks, approving mortgage loan applications when the borrower has the ability to repay the loan,” said Wells Fargo spokeswoman Vickee Adams. “The Home Mortgage Disclosure Act report of 2009, the most recent data available, shows that Wells Fargo was the No. 1 originator of home loans overall and in each of the following categories: African-Americans, Asians, Native Americans, and residents of low- and moderate-income neighborhoods. We were the second largest originator of home loans to Hispanic borrowers.

“Finally, in addition to the community partnerships and materials that we develop for home buyers, the bottom line is from January 2009 through February 2011 we have assisted 649,075 customers facing financial hardship with a trial or completed loan modification, 14 percent of which were under the federal government’s Home Affordable Modification Program (HAMP).”

Attorneys on both sides of the issue in Memphis have been waiting for a similar ruling in Memphis and met in Jackson April 1 to present their arguments for and against Wells’ motion to dismiss the local suit.

Memphis attorneys representing Wells against the city and county include two Burch, Porter & Johnson PLLC attorneys, Jennifer Hagerman and Jef Feibelman.

That hearing lasted around 90 minutes. Anderson only asked a few questions and didn’t seem to tip his hand as to which way he’s leaning.

“The case is now in the judge’s hands,” said Relman, one of the Washington attorneys who came to Jackson for the hearing. “He’ll decide whether it goes forward.”

The Memphis lawsuit against Wells has been pending for almost a year and a half. The city and county announced their joint filing of a more than 50-page suit at a December 2009 press conference against the backdrop of the National Civil Rights Museum.

Memphis Mayor A C Wharton Jr. traveled to Washington in early 2010 and personally laid out the city-county case for Tom Perez, the assistant U.S. attorney general who heads the U.S. Justice Department’s civil rights division.

Also in early 2010, Wharton laid out the city’s case against Wells in testimony he gave in Washington to a judiciary subcommittee of the U.S. House of Representatives.

“With the unfair practices Wells Fargo and certain other mortgage lenders have promoted, the American dream has effectively not only been transformed into a temporary pipe dream, but a ticking time bomb,” Wharton said in his House testimony.

PROPERTY SALES 36 154 6,546
MORTGAGES 34 94 4,129
BUILDING PERMITS 201 554 15,915
BANKRUPTCIES 43 126 3,396