City Can Proceed With Wells Fargo Lawsuit

Case Says Discriminatory Lending Led To Foreclosures

But Legg wrote that the depositions of two former Wells Fargo employees provide "sufficient proof to proceed with its claim for disparate treatment discrimination under the Fair Housing Act."

Those affidavits, of Elizabeth Jacobson and Tony Paschal, said they witnessed the company "steer" black borrowers into higher-interest subprime loans, termed "ghetto loans" by other employees, even when they qualified for traditional, cheaper loans.

City lawyers allege that in 2006, Wells Fargo made subprime loans to 65 percent of its black customers and 15 percent of its white customers.

A spokesman for Wells Fargo said that financial risk alone, not race, determined the kind of loans available to borrowers. And a lawyer for Wells Fargo called Jacobson and Paschal "disgruntled former employees" pursuing their own litigation against the company.

Legg asked the lawyers to submit their plans for how discovery should proceed by July 13; he'll have a hearing July 20. The judge urged the city to limit the amount of information it is seeking.