Wells Fargo is accused of targeting African-American as well as Latino borrowers for more expensive home loans compared to their white counterparts in Chicago area which prolongs a local and national foreclosure crisis as relayed by the biggest county in Illinois.
Cook County has a population of more than 5 million and accused the bank of engaging in predatory lending. A complaint was filed yesterday in Chicago federal court after the same was done by municipal governments in Los Angeles and Miami.
The county said that the bank is involved in equity stripping and its tactics start at home-loans and continue to refinancing and foreclosure. The process may have involved around 26,000 loans. The complaint said, "Equity stripping is an abusive form of 'asset based lending' that maximizes lender profits based on the value of the underlying asset and onerous loan terms, while in disregard for a borrower's ability to repay."
The bank's structure fee is also aimed at minority women. They practice bundling mortgages to sell as securities which allowed the lender to make money off loans even in the event of a foreclosure. The county is currently seeking a court order stopping the practice and damages that may exceed $300 million.
According to Tom Goyda who is a spokesman for the San Francisco-based bank, 'It's disappointing they chose to pursue a lawsuit against Wells Fargo rather than collaborate together to help borrowers and home owners in the county. We stand behind our record as a fair and responsible lender."
The bank also faces a lawsuit by the federal government over its mortgage lending. There were also allegations that included "red-lining" minority areas to block loans and not telling investors about the health of mortgages that were bundled and sold to them. The cities demanded to be paid for damages for lost property-tax revenue and increased municipal services coming from foreclosures. The banks knew the loans might fail but issued them anyway.
