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.
