Real Estate

Baltimore Sides with Homeowners in Redlining Lawsuit

The tables have turned in the city of Baltimore. Rather than angry residents fighting City Hall, it's City Hall fighting for angry residents. The city has taken on financial giant Wells Fargo Bank N.A. in a federal court lawsuit. The suit claims that Wells Fargo has engaged in "reverse redlining" mortgage loans in minority neighborhoods.

Baltimore Sues Wells Fargo for Reverse Redlining

Last year Baltimore made history by being the first city to file suit against a mortgage lender. The city filed suit against Wells Fargo Bank in federal district court. The suit claimed that Wells Fargo's discriminatory lending practices harmed the city by adding to the decline of poor minority neighborhoods. More than 30,000 properties are vacant in the city of Baltimore, and Wells Fargo foreclosed on 150 of them.

The city claims Wells Fargo caused the decline through the illegal practice of "reverse redlining." This is when minority neighborhoods are targeted for subprime loans - one of the factors of the current economic downturn.

Supporting its lawsuit, the city submitted statements from two former employees of Wells Fargo who stated that bank employees targeted zip codes in predominantly black regions for subprime loans. These were referred to within the bank as "ghetto loans."

The City Faces Legal Hurdles

After Baltimore filed its suit, Cleveland, Ohio and Birmingham, Alabama filed similar lawsuits against mortgage lenders. However, federal judges dismissed those suits. The hurdle facing cities in such suits is proving the key elements of "breach of duty" and "proximate cause."

Whenever a civil suit is filed because someone harmed another person or entity, the plaintiff needs to show the defendant broke a duty owed to the plaintiff. They also must prove this caused damage to the person suing, in this case the city of Baltimore.

Wells Fargo has asked the judge to dismiss the case, arguing that the city lacks standing to sue. In other words, Wells Fargo says it doesn't owe the city any duty. The judge suggested limiting the scope of the charge to 150 foreclosed and vacant properties that were the target of the bad mortgage loans.

What if I Have Been the Victim of Unfair Lending?

The suit filed by Baltimore is one example of unlawful discrimination. Several state and federal laws prohibit discrimination on the basis of sex, gender, race, national origin and sexual orientation.

Several "acts" protect from unfair mortgage practices: Fair Housing Act, Equal Credit Opportunity Act and Home Disclosure Act. These were passed so everyone could get a fair shot at owning a home. The US Department of Housing and Urban Development (HUD) watches over and investigates complaints against banks.

The federal Fair Debt Collection Practices Act prevents unfair collection practices. It contains very specific requirements. Collectors must identify in writing their communications are to collect a debt, and any information obtained may be used for that purpose.

Ask an attorney if you believe you've been the subject of unfair treatment by lenders or collectors. The attorney will analyze your situation and will let you know whether you have a basis for filing a lawsuit.

Owning a house is part of the "American Dream," and it's a crime to discriminate or target certain people based on many factors. Before going to a bank to pre-qualify for a loan, know what banks can and can't do. Take action if you think you're targeted.

Questions for Your Attorney

  • I was targeted for a subprime loan by my bank. Is there anything I can do now to get out of it?
  • I received a letter from a law firm acting as a collection agency, but the letter didn’t say they were a collection agency. Do I have to pay?
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