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Conservatives would have you believe that the entire housing bust and ensuing economic collapse was the fault of GSE lenders, Freddie and Fannie, loaning to "risky" customers, "those" people who just shouldn't be homeowners, rather than the banks who were preying on customers they knew all along would be potential default risks.

According to Huffington Post's Shahien Nasiripour, one of those predatory lenders is finally in a legal hotseat over the practice of "reverse redlining."

WASHINGTON -- The Department of Justice is preparing a lawsuit against Wells Fargo, the nation's largest home mortgage lender, for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.

The company, the fourth-largest U.S. bank by assets, is currently embroiled in pre-lawsuit negotiations with the Justice Department in hopes it will settle the accusations and avoid a public lawsuit, these people said.

The allegations mirror those in public actions taken by the Federal Reserve and a separate lawsuit filed by the city of Baltimore.[...]

In its ongoing case against Baltimore, Wells Fargo stands accused of using those same practices, but deploying them against black borrowers in majority-black neighborhoods, an act commonly known as "reverse redlining." The city alleges that the bank targeted black borrowers, knowing they'd ultimately default on their loans, but did not fear shouldering the cost because Wells sold those loans to investors. Wells Fargo denies the allegations.[...]

The previously-undisclosed Justice probe, which is being led by the Civil Rights division's Fair Lending Unit, lends credence to the city's lawsuit, sources told The Huffington Post.

This would be the definition of predatory lending, a bank knowingly targeting borrowers who won't be able to pay, then selling the mortgages to minimize its own risk. If it happened at Wells Fargo, which as Nasiripour points has been considered among the good guys in this whole bankster mess, then you know it happened throughout the industry. This probe is good news, but needs to be expanded, and some banksters need to go to prison.

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Comment Preferences

  •  Tip Jar (12+ / 0-)

    "There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning." —Warren Buffett

    by Joan McCarter on Wed Jul 27, 2011 at 03:47:22 PM PDT

  •  Hey! No debt ceiling tie-ins. I'm amazed that (0+ / 0-)

    there's anything else.  I even missed any woozle/pootie diary today.

    Wells Fargo kept buying my loan note from my last house (through a couple of refi's).  The current note has apparently not been sold, so I'm not back with WF.  Still, I never had problems with them.

    I'll be interested to see, though, if there really are some bad eggs here.

  •  Wells Fargo is no good guy. (3+ / 0-)
    Recommended by:
    mrsgoo, No one gets out alive, JVolvo

    they were in re-fi process with a woman i worked with who was trying to modify a ARM reset.  WF said that she had to be in default to get into government program.  the bank stalled for months and then told her she didn't qualify.  WF said that if she wired them $13,000 it would make her up to date on mortgage payments.  she wired the money and WF took $7,000 for attorney and appraisal fees, for the foreclosure that they had been doing right along and applied $6,000 to the mortgage and foreclosed on her house.  also,  WF was involved in laundering drug money for gangs in Mexico and paid a settlement that amounted to around 2% of the profit it had netted.  if these are the good guys, we are all well and truely screwed.

  •  pfft (0+ / 0-)
    In its ongoing case against Baltimore

    Is this the same case that got summarily dismissed twice already?


  •  Thank You (0+ / 0-)

    Just today someone right here on DailyKOS was STILL denying that Black folks (later Latinos) were primary targets for predatory loan products and that the targeting was racial, not economic (since many of these homeowners could have qualified for far better loans using the traditional metrics of credit rating and debt-to-income ratio.)  Diaries like this correcting the myth that the shenanigans that led to the foreclosure crisis may be explained simply by looking at "class" instead of "race."

    If you don't stand for something, you will go for anything. Visit Maat's Feather

    by shanikka on Wed Jul 27, 2011 at 10:48:41 PM PDT

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