Wells Fargo Targeted “Mud People” for Subprime “Ghetto” Loans

This news came during the weekend. And yes, “mud people” is a racist pejorative for black people. That’s how a particular bank’s employees viewed its customers.


(The Nation magazine had a finger on the tip of the looming disaster; this was recorded in July 2008.)

Two former loan officers, Beth Jacobson and Tony Paschal, in affidavits in support of a Federal lawsuit filed by the City of Baltimore, claim that Wells Fargo Bank deliberately and deceptively steered blacks (and Latinos), using zip codes and black churches, into taking subprime home loans. These loans were given even if certain blacks had good credit ratings. In effect, the bank practiced what is called reverse redlining, that is, marketing the most expensive loans to blacks. These bad loans resulted in the avalanche of foreclosures that together with derivatives nearly brought down the whole financial sector.

Wells Fargo, Ms. Jacobson said in an interview (in the New York Times), saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”

“We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”

Jacobson is white; Paschal on the other hand, is black. Paschal worked at an Annandale, VA Wells Fargo for ten years, from 1997 to 2007, and apparently saw a lot:

In 2001, he states in his affidavit, Wells Fargo created a unit in the mid-Atlantic region to push expensive refinancing loans on black customers, particularly those living in Baltimore, southeast Washington and Prince George’s County, Md.

“They referred to subprime loans made in minority communities as ghetto loans and minority customers as ‘those people have bad credit’, ‘those people don’t pay their bills’ and ‘mud people,’ ” Mr. Paschal said in his affidavit.

He said a bank office in Silver Spring, Md., had an “affinity group marketing” section, which hired blacks to call on African-American churches.

“The company put ‘bounties’ on minority borrowers,” Mr. Paschal said. “By this I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities.”

Baltimore, Maryland is not the only government entity going after Wells Fargo. California, Illinois and New York have pending suits and investigations against the bank. Moreover, the N.A.A.C.P. has filed a class action suit against several banks, including Wells Fargo and H.S.B.C., charging them with “systematic, institutional racism.” It’s cost Baltimore and other cities and states hundreds of millions of dollars worth of lost revenues and public services. But for homeowners with a subprime loan, it was far worse. For example, if an individual took out a $165,000 mortgage, the bank could add upwards to $100,000 interest.

Even if some black customers had perfect credit scores, bank officials found a way to flip the loan from prime to subprime. They would tell the underwriting department that the customer did not wish to provide income information, even if the customer may have already provided the bank with W-2 forms.

Of course, Wells Fargo protests too much, saying that it was only providing a service to new customers. The City of Baltimore continues its lawsuit with Wells Fargo Bank later this month.

See also: Screw Credit Cards, Foreclosures Hitting Blacks and Latinos Hardest.

~ by blksista on June 8, 2009.

One Response to “Wells Fargo Targeted “Mud People” for Subprime “Ghetto” Loans”

  1. […] 13, 2009 · No Comments I wonder if Wells Fargo Oakland has acted the same as their sister offices in Baltimore. Hm. Paging John […]

    Like

Comments are closed.

 
%d bloggers like this: