Baltimore homeowners could receive counseling and financial support - including short-term loans to help avoid foreclosure - if the city wins the predatory and discriminatory lending lawsuit it filed yesterday against Wells Fargo Bank, Mayor Sheila Dixon said.
After reviewing foreclosure data, city attorneys concluded that the leading mortgage lender was steering black homebuyers into high-cost, subprime loans, a contention Wells Fargo denies. City officials believe theirs is the first attempt by a municipality to recoup losses as a result of the subprime mortgage crisis.
"If you look at the city and ... you see where we are making headway in trying to create affordable housing, and then you find that there is this case of predatory and discriminatory practices, it takes away from our resources and efforts," Dixon said during a City Hall news conference yesterday.
Dixon and other officials, including City Solicitor George Nilson and Housing Commissioner Paul T. Graziano, said it is time to set things right.
"This is an ugly chapter in the sorry crisis we find ourselves in with subprime mortgages," Nilson said "[The city is] the second victim. First are the homeowners."
The lawsuit, filed in U.S. District Court in Baltimore, has been in the works since early last year, when city attorneys started to review foreclosure data. Wells Fargo issued a statement Monday saying the lender does not engage in illegal discrimination.
City officials estimate that they could win "tens of millions" in damages if they prevail in the lawsuit and that a chunk of that money would be funneled into public programs to aid homeowners struggling with mortgages with adjustable interest rates.
Graziano said the city could increase marketing and outreach efforts to homeowners in crisis, as well as counseling opportunities. In addition, he said that the city could provide up to $5,000 to homeowners to help them make mortgage payments until they can refinance. Communities especially hard-hit by foreclosures could receive improved code enforcement to avoid problems associated with vacant properties.
The city estimates that about 4,300 Baltimore homeowners' mortgage interest rates will be adjusted upward this year. An additional 2,000 loans will be adjusted in 2009. City officials are wary of more residents losing their homes to foreclosure. Since 2000, more than 33,000 city homes have been subjected to foreclosure filings, city officials said.
Jonquil Ishway, who lives in Beechfield in Southwest Baltimore, took out two mortgages a year ago to purchase her home but lost her job a few months later. She had both mortgages with Wells Fargo, and when she tried to work with the bank to lower or delay payments, bank officers told her she did not qualify. Ishway recently had to file for bankruptcy for a second time - the first time was in 1999 - to keep her home.
"I don't think anyone should take advantage of someone," Ishway said. "If they had turned me down for a loan, I would have been disappointed, but I would have gotten over it. That's better than putting myself and a bunch of other people in predatory loans and banking on us losing our homes."
Those who work with homeowners in financial trouble said they have heard negative stories about Wells Fargo, as well as other banking institutions, saying they appear to prey on minority communities.
Anne Balcer Norton, director of the foreclosure prevention division of the St. Ambrose Housing Aid Center, said there is a history of minority communities being tapped by subprime mortgage lenders. Her organization works with borrowers stung by such loans to avoid foreclosure.
"It's good to see the city is taking this on," she said. "When you look at the numbers ... you see the subprime originations, as a whole, are concentrated in the minority community in and around Baltimore City and Prince George's County."
Roy Miller, a home ownership coordinator with Belair Edison Neighborhoods Inc., called Wells Fargo one of the subprime "players."
"I think the city has to take a step, it has to protect its residents," Miller said. "Many of our neighborhoods have been under siege for years."