According to media reports, the State of Philadelphia has instigated a legal suit against Wells Fargo. The State alleges that the San Francisco based bank was in violation of the 1968 Fair Housing Act. It is said that the bank has applied predatory lending practices that are exorbitant to the minority mortgage borrowers. Of course, the bank denies the allegations are terming them absurd and unsubstantiated. It says that its practices are fair and are in line with the Fair Housing Act. Mr. Karl Heideck, a Philadelphia-based attorney, puts the case into perspective and explains the impact of the case.
The case which was filed for the Eastern District of Pennsylvania’s U.S District Court on the 15th of May 2017 alleges that the bank put Hispanic and Black borrowers into riskier loans characterized by higher interest rates despite them qualifying for lower risk and lower interest mortgages. The State also alleges that the bank applied discriminatory lending tactics making it difficult for these set of borrowers in refinancing their mortgages. This forces most of the borrowers into foreclosure as compared to their white borrowers.
It is also alleged that the bank’s actions led to the blight of the minority due to the increased levels of foreclosure resulting from the failure of the borrowers to refinance these riskier loans. The complainant, Philadelphia says that there is 4.7 times likelihood for families in minority neighborhoods to be foreclosed as compared to those in predominantly white neighborhoods. The city is demanding for unspecified monetary damages as well as injunctions against Wells Fargo to stop it from applying such discriminatory lending practices.
Philadelphia is America’s 5th largest city with a population of 1.57 million people. It also has the largest minority population comprising of 42% blacks and 12% Hispanics as per the 2010 U.S Census. According to the bank, lending practices towards the minority hurts the city as many of the borrowers later apply for other loans to refinance their mortgages. But the state says that the lending practices hurt the city as it leads to lower property values.
The alleged practices by Wells Fargo are known as redlining. The practice dates back to 1930s when banks drew red lines around neighborhoods inhabited by people the banks don’t want to lend to. However, these practices are unconstitutional if they are applied due to the borrowers’ race or where they lived. It is also illegal whenever done due to impermissible purposes. On the other hand, the practice can be legal if done for neighborhoods which do not attain certain lending criteria and standards.
About Karl Heideck
Karl Heideck is a famous Philadelphia-based attorney who specializes in complex commercial litigations focusing in liquidity, acquisitions, risk management and contract drafting. He is a 2009 Juris Doctor graduate of Temple University’s Beasley Law School. Mr. Karl Heideck also has a Bachelor’s degree in English Literature from Swarthmore College. For more info about us: https://www.lawyer.com/karl-heideck.html click here.
Over his career, he has successfully handled several high-end litigations. Karl offers his clients the best advice and legal representation in different areas of commercial law.