The vacant, run-down rowhouse at 1615 N. Smallwood St. has for years been a stain on an otherwise lively, well-kept West Baltimore block.
Its green awning collapsed from the winter snow and still hangs crumpled from the house's façade. In the summertime, transients gather on the front porch to play cards and smoke marijuana, neighbors say.
Baltimore's top city lawyers want someone to answer for blighted properties like this one, and to pay for the specific damages they inflict on communities, including the cost of emergency services, cleaning and boarding up the houses, and lost property tax revenues.
Specifically, they want California-based bank Wells Fargo & Co., which made thousands of subprime home loans in Baltimore and other cities throughout the real estate boom years, to take the blame.
The city first filed suit against Wells Fargo in 2008, lodging primarily a civil rights case that accused the bank of violating the Fair Housing Act by targeting black churches and low-income, minority neighborhoods with dishonest loans that borrowers could not afford. A judge dismissed that case as "implausible."
Now the city's attorneys have filed a new complaint focusing on the alleged damages caused by houses like the one on Smallwood Street — one of 33,000 Baltimore properties left vacant by the foreclosure crisis.
City Solicitor George Nilson said the total value of damages sought by the city will approach $20 million. Affidavits filed early in the case alleged "tens of millions" of dollars in losses from Wells Fargo's lending practices, and a report released in June 2009 estimated that the annual cost per block for police and fire services increased $1,472 for every vacant property on that block.
Still, lawyers for the city say that despite the new focus on exactly how the city was damaged, the core of their case is still about racial discrimination.
"Ultimately, the amount of damages in this case is far less significant than whether or not a jury says, ‘You're right, Wells Fargo targeted an African-American community with predatory loans, and they did it for reasons of greed,' " said John P. Relman, a Washington-based lawyer working with the city on the case. "If a jury says that, that will be a watershed. … That would be an incredible indictment of a major financial institution. Nothing like that has been done before. That's what this is really about."
Wells Fargo disagrees. The bank has accused the city, which faces a budget crisis, of suing as a means of generating revenue to fill the gaps.
Andrew L. Sandler, a partner at BuckleySandler LLP, the firm representing the bank, pointed out that Relman has also filed what he called a "copycat suit" in a federal district court in Tennessee, alleging more discriminatory lending practices in Memphis and in the surrounding county.
"One year, they file a suit saying that the lender didn't make enough loans in minority communities: redlining. The next year, they file a suit saying that they made too many loans in minority communities: reverse red-lining," Sandler said. "This is just a commercial enterprise for these lawyers. … The same lawyers have been shopping the same complaint to various municipalities for two years."
Teri Schrettenbrunner, a spokeswoman for the bank's mortgage-lending arm, took a more conciliatory tone.
"Wells Fargo believes collaborative problem-solving, not divisive litigation, is the key to reversing the national problem of home foreclosures. We stand by our fair and responsible lending practices, and demonstrate them every day through our work with homeowners and communities across the country," she said last week.
The house at 1615 N. Smallwood is one of more than 250 properties identified in the new complaint as blighted houses that fell into disrepair because of unnecessary foreclosures resulting from dishonest loans.
Each address listed comes with a description of the woes the house has allegedly inflicted on the community: vermin, repeated visits by police and firefighters, and sometimes up to a half-dozen visits by housing code inspectors per year are recorded for most houses on the list.
For Annette V. Ingram, a mother of three who lives across the street from 1615 N. Smallwood, the vacant house is more than just an eyesore.
Last summer, when she was trying to refinance the mortgage on her house, which she bought for $122,000 in 2008, lenders told her that the prices of comparable houses in the neighborhood had been driven down by a high number of vacants. She said she was rejected by three lenders, who refused to lend more than $100,000.
"I had a hard time," she said, sitting on her porch one evening last week with her 14-year-old son. "Even after I pay my mortgage, I still have to eat. I still have to pay my car note. … I think the biggest problem [in the city] is the vacant houses. Once they get that cleared up, we'll be OK."