The city of Oakland, California is the latest municipality to sue one of the nation’s largest banks, accusing Wells Fargo (WFC) of allegedly steering minority borrowers into higher-cost loans, which caused rampant foreclosures and neighborhood blight.
According to a Reuters report, Oakland filed suit against Wells Fargo in a Northern California federal court, stating that Wells Fargo violated the Fair Housing Act by “targeting minorities” with high-cost loans, despite their ability to qualify for lower cost loans.
The lawsuit said many of the loans ended in foreclosure because Wells refused to refinance them on the same terms it granted to white borrowers.
The lawsuit said Wells steered minorities into various types of "predatory loans," including those with high interest rates, balloon payments and large prepayment penalties.
As is the case with all of these lawsuits, the bank said that it would "vigorously defend itself." I hope that vigorous defense includes a cage match involving Ronda Rousey, but that's likely too much to hope for.
Although a number of these suits have continued to drag on, the linked article notes the more customary outcome when the bank does not settle.
Wells Fargo secured a victory in court, when a U.S. District Judge dismissed a lawsuit brought against the lender by Cook County, Illinois, which also accused the bank of predatory lending
Yes, dismissal by the court is often the result. However, as we noted a couple of years ago, cities keep bringing these meritless suits because they think that they can squeeze a settlement out of big banks on the banks would rather settle quickly and reduce the reputational damage than pay trial lawyers, which no one in their right mind wants to do for any length of time. Also, as our prior post observed, the US Justice Department under the current administration has on occasion jumped into the fray on the side of the cities and helped to pummel the banks. That may stop in 2017, but there's still a lot of blood to be spilled before then.
Unfortunately, the more settlements that occur, the more municipalities pile on. Five years ago I alleged that the lesson to be learned was to never settle. I still believe that is the best approach to stopping this municipal extortion. On the other hand, it's not my bank being sued and it''s not my money being spent.