- The Washington Times - Wednesday, January 9, 2008

BALTIMORE (AP) — Black neighborhoods in Baltimore were disproportionately affected by the subprime-mortgage fallout, according to a suit filed in federal court yesterday by the city, which is attempting to recoup the costs of maintaining neighborhoods wracked by foreclosures.

The suit purports Wells Fargo Bank N.A. engaged in a pattern of predatory-lending practices in Baltimore’s poorest neighborhoods, leading to foreclosure rates nearly double the citywide average.

“When you have foreclosures, the property values drop, and you get less tax revenue. There’s fire and police costs that come from abandoned and boarded-up and vacant properties,” said John P. Relman, a Washington-based attorney who is representing the city in the lawsuit. “It leads to crime and drugs and school problems as the community is being destabilized.”

While the lawsuit, filed in U.S. District Court in Baltimore, does not specify compensatory or punitive damages, City Solicitor George Nilson said foreclosures have cost Baltimore tens of millions.

The lawsuit purports that San Francisco-based Wells Fargo targeted black neighborhoods by using reverse redlining, which is prohibited under the federal Fair Housing Act.

For example, it claims that mortgages for homes worth $75,000 or less — most of which are located in black neighborhoods — had higher rates and were laden with fees and surcharges.

“You could be equally well-qualified, but if you happen to buy a house that’s worth $75,000 or less, you’re going to pay more,” Mr. Relman said.

Wells Fargo does not comment on pending litigation, but spokeswoman Debora Blume said in a statement that the company does not consider race when making loans.

“We do not tolerate illegal discrimination against, or unfair treatment of, any consumer,” Ms. Blume said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly — our continued growth depends on it.”

More than 33,000 homes in Baltimore have been subjected to foreclosure since 2000.

Wells Fargo, one of the two largest mortgage providers in the city since 2004, made 1,285 loans a year totaling more than $600 million between then and 2007, according to the city.

Wells Fargo had 135 foreclosures in 2005 and 2006 and there were at least 70 foreclosures in the first half of 2007, according to the lawsuit, more than any other lender. Two-thirds of Wells Fargo’s foreclosures occurred in neighborhoods that are more than 60 percent black during the first two years, according to the suit.

Foreclosures overall are on the rise. The lawsuit says the number of “foreclosure events,” such as notices of default or foreclosure sales, increased fivefold from the first quarter to the second quarter of 2007.

A report commissioned last November by the U.S. Conference of Mayors projected that 361 metropolitan areas would take an economic hit of $166 billion in 2008 because of the foreclosure crisis. The Baltimore area was expected to lose more than $1.6 billion in economic output, according to the report.

Mr. Nilson said he expected to hear from other jurisdictions interested in filing similar lawsuits or joining Baltimore.

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