The issue of whether minorities in the US were targeted and subsequently exploited by mortgage lenders has long been a contentious one.
A 2007 story in the San Diego Tribune noted:
African-Americans and Latinos are much more likely to be sold high-cost home loans than white households in San Diego and around the nation, according to a study being released today by the Association of Community Organizations for Reform Now, or ACORN.
The Foreclosure Exposure report found that nearly 31 percent of home-refinance loans made to African-Americans in San Diego County in 2006 were high cost. Twenty-five percent of such loans to Latinos were high cost.
By comparison, less than 13 percent of home-refinance loans made to whites had unfavorably high interest rates.
Last June, Elizabeth Warren argued in a post on the Credit Slips blog that “some lenders seem to draw a line around minority neighbourhoods, then paint a big bulls-eye on them” (a thesis supported by research cited in the Washington Post).
Warren also pointed to a lawsuit filed by the state of Massachusetts against Option One:
Massachusetts Attorney General Martha Coakley filed suit yesterday against Option One, the mortgage arm of H&R Block, alleging that they piled on costs for non-white families.
The specific examples are breath-taking: A black borrower with a 523 credit score paid $10,635 to refinance $167,000, while a white borrower with a 520 credit score paid $2,275 to refinance $200,000. Coakley said this was happening systematically across Massachusetts and elsewhere in the country.
All of which make a story in the New York Times published over the weekend that much more interesting (H/T Dealbreaker).
The piece, headlined “Bank Accused of Pushing Mortgage Deals on Blacks”, details the experiences of former Wells Fargo employees who “for a decade, systematically [singled] out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages.”
And included the following tidbits (our emphasis):
Wells Fargo, [former employee Beth Jacobson said in an interview], saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”
“We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”
Well Fargo, for its part, offered the NY Times the following statement:
“We have worked extremely hard to make homeownership possible for more African-American borrowers,” wrote Kevin Waetke, a spokesman for Wells Fargo Home Mortgage. “We absolutely do not tolerate team members treating our customers or others disrespectfully or unfairly, or who violate our ethics and lending practices.”
The Baltimore Sun has also been on the story (and received the very same response from Wells Fargo as did the NY Times). And here’s a linguistic gem from the Sun story:Former loan officer Tony Paschal said Wells Fargo targeted black communities for bad loans by focusing on African-American churches, using black employees as its public face, and using software to translate marketing materials into various languages, including something called “African American.”
Related links:
The United States of Subprime – WSJ (2007)