Wells Fargo’s “Ghetto Loans” and the “Mud People”

Apparently, one Mr. Paschal worked as a loan officer in Wells Fargo’s Annandale, Virginia offices for 10 years, from 1997 to 2007. Speaking about Wells Fargo, his affidavit states:

“They referred to sub-prime loans made in minority communities as ghetto loans and minority customers as ‘mud people.'” He also said a Wells Fargo Bank office in Silver Spring, Maryland had an “affinity group marketing” department, whose purpose was to hire African Americans to call on African-American churches.”

I suppose that was their “Mud People Helping Mud People Program”. I have got to watch more television, because I completely missed that ad campaign.

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

Perhaps the Wells posters said: “Get Down and Dirty. Bring in a Mud Person, and Win a Trip to Hawaii!”

The City of Baltimore has filed a lawsuit against Well Fargo Bank, and the N.A.A.C.P. has filed a class action against the bank, as well. According to a story written by Michael Powell that appeared in the New York Times on June 7th:

“City and state officials across the nation have investigated and sometimes sued Wells Fargo over its practices. The Illinois attorney general has investigated whether Wells Fargo Financial violated fair lending and civil rights laws by steering black and Latino homeowners into high-interest loans. New York’s attorney general, Andrew M. Cuomo, raised similar questions about the lending practices of Wells Fargo, JPMorgan Chase and Citigroup, among other banks.”

Beth Jacobson says that she and fellow loan officers at Wells Fargo Bank systematically singled out blacks in and around Baltimore in order to sell them high-interest sub-prime mortgages, whether they would have qualified for prime loans or not.

In fact, both Ms. Jacobson and Mr. Paschal said in affidavits related to the suit filed by the City of Baltimore, that Wells Fargo had given bonuses to loan officers who referred borrowers to the sub-prime division that should have qualified for a prime loan. Jacobson said that she made $700,000 in one year and that Wells paid for her and other sub-prime officers to vacation at resorts across the country.

See, and I can’t even say anything about that. Because that just made me physically ill.

Paschal also stated in his affidavit that:

“In 2001, 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, Maryland.”

Powell’s story in the Times ran under the euphemistic headline, “Bank Accused of Pushing Mortgage Deals on Blacks,” said that the City of Baltimore’s lawsuit claims that Wells Fargo’s practices caused hundreds of homeowners to lose homes to foreclosure, which cost the city tens of millions in tax dollars.

Yep, that’s exactly what offended me about the whole thing. As soon as I started reading I thought to myself: “Wow… I wonder how much the whole mud people strategy thing cost the city in tax dollars.”

The Times reported that, in an interview, Jacobson said that Wells Fargo saw the black community as an ideal market for pushing sub-prime mortgages because “working-class blacks were hungry to be part of the nation’s home-owning mania”.

Is that true, working-class blacks? Write to me and let me know. By the way, do you guys have a newsletter or anything? I’d like to be able to keep track of what you guys are hungry for at any given moment. I think it’s cool that you all hunger for the same thing. I’m a Jew and you can’t get three of us to agree that the sky is blue.

As written in the Times:

“We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing sub-prime 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 sub-prime loans.”

Well you know what they say… Grab mud people by their religious leaders and their hearts and minds will follow.

The Times also reported that Baltimore officials say that data released by the city as part of the lawsuit show that more than half of the properties subject to foreclosure on a Wells Fargo loan between 2005-2008 are now vacant. The city’s officials also say that 71% of those are in predominantly black neighborhoods.

Baltimore filed the lawsuit against Wells Fargo in January of 2008. But as of June 7, 2009, Judge Benson E. Legg of Federal District Court asked the city to file additional paperwork and had not decided whether the lawsuit would move forward. I think I better print that again… here you go…

Baltimore filed the lawsuit against Wells Fargo in January of 2008. But as of June 7, 2009, Judge Benson E. Legg of Federal District Court asked the city to file additional paperwork and had not decided whether the lawsuit would move forward. Did that sink in the second time around?

The Times story said that officials from Wells Fargo have declined to be interviewed since the suit was filed… IN JANUARY OF 2008! Apparently, Wells has issued some drivel, saying things like:

“We have worked extremely hard to make homeownership possible for more African-American borrowers,” wrote Kevin Waetke, a spokesman for Wells Fargo Home Mortgage.

Oh, Kevin… you so need a new job. Run, my lad, run.

Recently, The New York Times conducted an analysis of mortgage lending in New York City. Among other things, they found that when looking at Wells Fargo borrowers, among black households making more than $68,000 a year, 16.1% had sub-prime loans, compared to just 2% of whites in that same income group.

And no doubt some lawyer for Wells is getting ready to make a case for why that data isn’t conclusive.

Eric Halperin, director of the Washington office of the Center for Responsible Lending, said that his organization has known that African Americans and Latinos end up with sub-prime loans far more frequently that whites with the same credit profile. “The question has been why, and the gory details of this complaint may provide an answer,” Halperin told the Times.

It MAY provide an answer, may it? One more statement like that and I’m going to lose my lunch.

According to the Times:

“For a homeowner taking out a $165,000 mortgage, a difference of three percentage points in the loan rate – a typical spread between conventional and sub-prime loans – adds more than $100,000 in interest payments.”

Relman & Dane, a civil rights law firm working with the City of Baltimore, has had no specific response from Wells Fargo as of June 7, 2009. Of course not. What’s to respond to?

Baltimore city officials, however, think the conclusion is clear… thank the Lord.

“They confirm our worst fears: that this is not just a case based on a review of numbers and a statistical analysis,” said the city solicitor, George Nilson. “You don’t have to scratch your head and wonder if maybe this was just an accident. The behavior is pretty explicit.”

Yet, somehow I just know that somewhere there’s someone doing some head-scratching… and we should find that person and make sure that he or she is not in a position to make decisions that affect others.

And the Times story ended with the sentence: Both sides expect to appear in court at a hearing in the case in late June.

So, it’s late June… and I’m waiting and waiting… and nothing. No news whatsoever. Go ahead… Google it yourself. Not a word from Wells Fargo. Not a word from the City of Baltimore. Nothing.  Not even a peep from what some at Wells Fargo might term “the mud person” in the White House. Oh, wait… maybe they’d consider him only half a mud person.

Mandelman out.