Baltimore Settles Landmark Fair Lending Case Against Wells Fargo
On July 12, 2012, the City of Baltimore resolved its landmark fair lending lawsuit against Wells Fargo, filed on the City's behalf by Relman, Dane & Colfax over four years ago. Resolution of the suit was announced concurrently with an announcement by the United States Department of Justice that it has reached a national fair lending settlement with Wells Fargo worth at least $175 million.
Baltimore alleged in its suit that Wells Fargo intentionally targeted the City's minority communities for predatory mortgage loans with discriminatory and unfair terms, a practice known as "reverse redlining." During the course of the litigation, Baltimore obtained a landmark ruling upholding the right of a municipality to sue under the Fair Housing Act.
Under its agreement with the City, Wells Fargo will provide $4.5 million in direct down payment assistance to qualifying Baltimore homebuyers. Wells Fargo will provide an additional $3 million for the City to use for priority housing and foreclosure-related initiatives. As part of the agreement, Wells Fargo has also committed to making $425 million in prime mortgage loans in Baltimore over the next five years, $125 million of which will be in low and moderate income neighborhoods.
Baltimore will also participate in the Justice Department's national settlement. Under that settlement, Wells Fargo will pay at least $125 million in compensation to minority borrowers who were overcharged or steered into subprime loans, including borrowers located in Baltimore City. More than 1,000 Baltimore borrowers are expected to receive compensation. According to the Justice Department, awards are expected to average $15,000 for each borrower improperly steered into a subprime loan. Wells Fargo will pay an additional $50 million for down payment assistance to borrowers in eight metropolitan areas, including Baltimore.
Yesterday's announcement was attended by Baltimore Mayor Stephanie Rawlings-Blake and by Tom Perez, United States Assistant Attorney General for Civil Rights. Assistant Attorney General Perez said that the national investigation was initiated as a result of the suit filed by Baltimore, and that Baltimore was the catalyst that led to the federal consent decree. "Baltimore got the ball rolling," said Perez. "The federal government heard you and the federal government followed up. . . . The lawsuit filed by Baltimore City in 2008 was the catalytic force, plain and simple. When you filed this lawsuit to call attention to the devastating consequences of this crisis, you got the attention of the federal government and you got the attention of the nation."
John Relman, Glenn Schlactus, Megan Cacace and Tara Ramchandani led the litigation effort on behalf of the City of Baltimore.