A lawsuit filed against Wells Fargo Bank, N.A., by the City of Baltimore alleges the lender is responsible for “tens of millions of dollars” in lost tax revenues to the city because of a few hundred foreclosures during the past seven years. In its request for a dismissal, Wells countered that the city itself was responsible for nearly 20,000 foreclosures during that same period.
The lawsuit was filed in U.S. District Court, District of Maryland, earlier this year, according to a case summary prepared by Sandra Vipond of Weiner Brodsky Sidman Kider PC — a Washington, D.C.-based law firm that provides mortgage banking litigation analysis.
Wells is accused of reverse redlining by targeting black borrowers for high-priced loans in violation of the Fair Housing Act.
“In contrast to ‘redlining,’ which involves denying prime credit to specific geographic areas because of the racial or ethnic composition of the area, reverse redlining involves the targeting of an area for the marketing of deceptive, predatory or otherwise unfair lending practices because of the race or ethnicity of the area’s residents,” the complaint states.
With just 313 foreclosures during the past seven years — a period in which 33,000 foreclosures were filed in the city — Baltimore alleges the San Francisco-based company had more foreclosures than any other lender, Vipond wrote. In addition, Well’s foreclosure rate in black neighborhoods is allegedly double city’s average rate, while its rate in white neighborhoods is allegedly less than half the average.
The Baltimore area ranked No. 60 among metropolitan areas with the worst foreclosure rates during the first quarter, when it saw 4,218 foreclosure filings, according to RealtyTrac. At 6,052 filings, the state of Maryland had the sixth worst foreclosure rate during April.
The high number of foreclosures on Wells’ loans to black borrowers have cost Baltimore “tens of millions of dollars” in lost tax revenues, increased expenditures for police and fire protection, and expenses to secure abandoned properties, the city claims.
But Wells has moved to dismiss the case, asserting, among other things, that the city lacks standing to pursue the claims because it has not identified any damages specifically attributable to Wells’ foreclosures, according to the summary.
In addition, Wells claims that more than 19,000 of the 33,000 foreclosures referenced in the complaint were the result of Baltimore’s enforcement of liens for unpaid water and property tax bills.
“The city places liens on homes for any type of unpaid municipal bill over $100, and then sells the liens to private investors, knowing the investors will threaten to foreclose on the homes unless the homeowners agree to pay exorbitant fees,” Wells said in its motion. “As a result of the city’s actions, homeowners have lost their homes over unpaid $272 water bills.”
The bank asserts that these tax lien sales have disproportionately harmed minority borrowers, Vipond said.
Baltimore fired back with an 82-page response accusing Wells of attempting to deflect blame for the city’s mounting foreclosure crisis and criticizing the company’s inclusion of the data on tax lien sales as extra-judicial facts that cannot be considered by the court on a motion to dismiss.
“Defendants would have the court believe that Baltimore has intentionally ‘unleashed’ on its residents a program of tax lien sales that causes thousands of foreclosures for nothing more than small unpaid water bills and the like,” the response said.
The city noted the 19,000 figure included all homeowners who entered the foreclosure process — a larger figure than the number of people actually foreclosed on due to tax liens.
Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A.
Case No. 08-00062-BEL
