The City of Philadelphia filed a lawsuit against Wells Fargo & Co. The allegation is that the bank violated the Fair Housing Act of 1968. This was done by making use of predatory practices of lending. These were specifically aimed at those mortgage borrowers who belonged to the minority. Wells Fargo has denied these allegations. It says that it has followed fair practices. Hence all the claims levied in the lawsuit happen to be unsubstantiated.This lawsuit was filed in the U.S. District Court for the Eastern District of Pennsylvania on 15 May. The bank was earlier involved in a scandal last year regarding the opening of bogus accounts by its officials, which were in the names of its customers.Karl Heideck has further specified the allegations by the City.
It says that the bank diverted the Black as well as Hispanic borrowers into taking loans that were much riskier. Besides, these had higher interest rates too. This was when these borrowers were credit-qualified for taking mortgages that have lower-interest rates as well as lower-risks.Next, Philadelphia alleged that the bank did not permit these borrowers to refinance the mortgage later. This is why a large number of them had to opt for foreclosure. These claims were investigated for a year before the City decided to file the complaint.Karl Heideck further stated that data was collated of loans that were taken over a 10-year period.
This was when the city realized that black borrowers were nearly two times more likely to be given loans at higher interest loans and Hispanics were 1.7 times more likely to receive mortgage loans that were riskier, as compared to white borrowers. All these borrowers from Wells Fargo had FICO scores that were 660 or higher. On the other hand, the white borrowers who had similar credit scores were receiving mortgage loans with much lower interest rates.This is where Philadelphia alleges that these actions of the bank led to blight in the minority neighborhoods. This is because foreclosure rates increased as the borrowers were not able to refinance their loans which were riskier. Original article.