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Two Cities Sue Wells Fargo Over Reverse Redlining and Foreclosure-Related Decay

May 16, 2011

Last week, our Redlands foreclosure defense lawyers wrote about the lawsuit by the city of Los Angeles alleging that Deutsche Bank made predatory loans, let foreclosed properties decay and forced renters out of their properties. In a May 12 story, Bloomberg News followed that report up with a discussion of other predatory lending cases filed by U.S. cities. In addition to the LA lawsuit, the story highlights two lawsuits by the cities of Memphis and Baltimore, both alleging that Wells Fargo Bank illegally engaged in "reverse redlining," the practice of pushing minorities toward expensive loans and loans they couldn't afford. In both cities, the lawsuits say, the practice led to high foreclosure rates and urban decay that is now causing increased costs to the cities.

Both cases specifically allege reverse redlining targeting African-Americans, in violation of federal antidiscrimination laws. A judge declined to dismiss the Memphis lawsuit May 5, and a Maryland judge made the same decision about the Baltimore lawsuit April 22. In essence, the cities allege that Wells Fargo intentionally approved borrowers of color for loans the bank knew they couldn't afford. Other African-American borrowers were allegedly steered toward more expensive subprime loans even though they could afford prime loans, setting them up for default later. After the defaults, the suits said, foreclosed properties were abandoned, costing the cities more in city services as well as lower tax revenue. The reverse redlining allegations are supported in both cases by sworn testimony from former Wells Fargo employees.

As Fullerton foreclosure defense attorneys, we're very interested to see how these lawsuits play out. Housing discrimination on the basis of race is illegal, which of course is the basis for these lawsuits. However, we very much doubt that banks would pass up the opportunity to make money by steering people of any race into a more expensive loan -- and unfortunately, that's not illegal when it's not done with race in mind. Instead, borrowers are supposed to be savvy enough to understand the market and what it can do for them. That's an unlikely proposition for most people, and we think many educated, intelligent people could have been exploited during the housing boom simply because they didn't have the tools to know when they were being exploited. And as these lawsuits allege, that kind of predatory lending has led to widespread foreclosures and blight.

Howard Law PC helps California residents fight unfair foreclosures using one of the few tools available: a lawsuit. Of course, we prefer to resolve cases by negotiation, but when negotiations fail or a foreclosure is imminent, we don't hesitate to file a lawsuit to save our clients' homes. Because California is a non-judicial foreclosure state, no human being reviews the validity of a decision to foreclose before it can go through. As a result, it's perfectly possible for a foreclosure to continue even when it's the result of predatory lending, other law-breaking or unfair dealing. Our Fallbrook foreclosure defense lawyers commonly sue over violations of HAMP rules, particularly denials of a loan modification that take place even though the borrower has met all of the program's requirements.

If you're tired of calling your lender repeatedly, only to be asked for the same information or for information they never before requested, you should call Howard Law instead. For a free, confidential evaluation of your case, send us a message online or call toll-free at 1-800-872-5925.