Wells Fargo wins dismissal of predatory lending lawsuits

Wells Fargo wins dismissal of predatory lending lawsuits

By Jonathan Stempel

(Reuters) – Wells Fargo & Co <WFC.N> won the dismissal of two lawsuits on Friday that had accused the largest U.S. mortgage lender of violating the federal Fair Housing Act by engaging in predatory lending practices in Los Angeles & Chicago.

The lawsuits by the city of Los Angeles & by Cook County, Illinois, which includes Chicago, accused Wells Fargo of steering black & Hispanic borrowers into higher-cost loans, a process sometimes called "reverse redlining".

p>They said this resulted in higher foreclosures & lower property tax collections, & necessitated higher spending to combat urban blight. Los Angeles & Chicago are the second- & third-most populous U.S. cities.

"We are pleased with both decisions," Wells Fargo spokesman Ancel Martinez said. The San Francisco-based lender is moreover the fourth-largest U.S. bank by assets.

Several large U.S. cities & counties such as Baltimore, Cleveland, Memphis & Miami have accused banks of biased mortgage lending that prolonged the nation's housing crisis. Their lawsuits have had mixed success.

In the Los Angeles case, the city accused Wells Fargo of discriminatory lending dating to 2004.

U.S. District Judge Otis Wright, however, found no showing of FHA violations within the two-year statute of limitations period prior to the December 2013 lawsuit.

Wright moreover faulted Los Angeles's litigation strategy. He said the city failed to identify any Wells Fargo policy to steer minorities into costly loans, & instead the city objected to the bank's issuance of federally-insured loans that can assist lower-income borrowers afford homes, despite their higher costs.

"In the name of advocating on behalf of minority borrowers, the city decided to fight for an outcome that would injure those same borrowers," Wright wrote. "That decision is disheartening."

Meanwhile, in the Chicago case, U.S. District Judge Gary Feinerman said Congress did not authorize entities such as Cook County to pursue an FHA claim to commence with.

The county "alleges neither that it was denied a loan nor offered unfavorable terms – setting aside the obvious point that Cook County is not alleged to have a race or other protected trait," Feinerman wrote.

He said his decision did not mean that Wells Fargo complied with the FHA, or that "direct victims" of alleged abusive lending did not deserve compensation.

The office of Los Angeles City Attorney Mike Feuer did not immediately respond to requests for comment on Wright's decision. The Cook County State's Attorney's Office said it is reviewing Feinerman's decision.

The cases are City of Los Angeles v. Wells Fargo & Co et al, U.S. District Court, Central District of California, No. 13-09007; & County of Cook, Illinois v. Wells Fargo & Co, U.S. District Court, Northern District of Illinois, No. 14-09548.

(Reporting by Jonathan Stempel in New York; Editing by Peter Galloway)

Los AngelesWells Fargo & Co

Source: “Reuters”

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