Lawsuit against Wells Fargo and Nationstar for alleged discriminatory lending practices

July 22, 2017

The borough of Sharon Hill is suing Wells Fargo Bank and Nationstar Mortgage for allegedly discriminatory lending practices it says have damaged lower-income and minority communities in Delaware County.


In its second amended complaint filed June 23 in Philadelphia federal court, Sharon Hill alleges the lenders have a “longstanding, unbroken policy” of steering minority borrowers into discriminatory mortgage loans that have had a disparate impact on poorer communities.


“The lenders’ discriminatory lending practices knowingly placed vulnerable underserved borrowers in loans they could not and cannot afford,” according to the suit. “These practices maximize the lender’s profit without regard to the borrower’s best interest, the borrower’s ability to repay, the financial health of underserved minorities communities like Sharon Hill, or the costs and injuries to the Borough of Sharon Hill.”


The suit claims loan officers used race as a determining factor when offering minorities mortgages that often came with higher rates or more onerous higher-cost products, while offering more favorable and less expensive loans to non-minority borrowers.


The lenders would also allegedly refuse to extend credit to minority borrowers who were looking to refinance their loans when such credit was made available to white borrowers, imposed substantial prepayment penalties that prevented refinancing, and charged excessive points and fees to minority borrowers, according to the complaint.


Sharon Hill claims these practices caused a disproportionately high number of foreclosures in economically distressed neighborhoods including Sharon Hill. The lenders shielded themselves from any significant risk by selling the vast majority of loans on the secondary market or by pushing Federal Housing Authority loans that are more likely to be repurchased by the federal government if they default, according to the suit.


Wells Fargo allegedly initiated more than 3,500 foreclosures in Delaware County since 2007, the majority of which were high-cost or high-risk loans issued to minorities in cash-strapped communities like Sharon Hill, according to the complaint.


Sharon Hill claims these foreclosures have had a direct impact of suppressing tax revenues, reducing property values and straining municipal services. The complaint cites a Philadelphia study that indicated the average value of each house within 150 feet of an abandoned home is reduced by more than $7,000.


Abandoned homes are also targets of theft, which can cause thousands of dollars in damage, increase fear of crime in the community, and further act to suppress home values, the suit says. Wells Fargo has also failed to maintain many of the homes it has repossessed, according to the complaint, allowing them to fall into such disrepair that they are essentially “unavailable” to purchasers in violation of the Fair Housing Act. One such property required demolition at the borough’s expense, according to the suit.


Sharon Hill is seeking compensatory and punitive damages, as well as a permanent injunction barring any further allegedly discriminatory conduct. It is also seeking $150,000 for demolition it claims to have performed on Wells Fargo’s behalf.


Wells Fargo spokesman James Braun said Wednesday that Sharon Hill’s allegations do not reflect how the company operates and that similar cases have been rejected by courts that have addressed the merits of the claims.


“Wells Fargo has been a part of the southeastern Pennsylvania community for more than 140 years and we will vigorously defend our record as a fair and responsible lender,” said Braun in an emailed statement. “We will continue to focus on helping customers in the local community succeed financially, and on expanding homeownership in Pennsylvania and across the United States.”


via A. Rose

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