Wells Fargo Employees Called Blacks “Niggers” and “Mud People”
As The Bank Steered African Americans To Subprime Loans, Lawsuit Alleges

For some black Baltimore residents, the pursuit of the American dream of home ownership turned into a nightmare for them and the City of Baltimore, according to a lawsuit filed June 1 against Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing Inc. in the U.S. District Court for the District of Maryland. NorthStar News obtained a copy of the lawsuit.

Black mortgage applicants allegedly were steered to high-interest subprime mortgages and not provided information about loan alternatives by Wells Fargo’s black employees who contacted applicants with the help of black churches.

Black mortgage applicants were told that only subprime mortgages were available, according to the lawsuit. When black applicants became homeowners, they realized years later they could not afford the subprime mortgages. Wells Fargo then foreclosed on the properties. Even black applicants who qualified for prime-rate mortgages were given subprime mortgages, according to an affidavit by Tony Paschal, a former Wells Fargo mortgage loan officer.

“ I had access to Wells Fargo customers’ loan records and applicants’ files for my work in the sales and marketing division and regularly saw minority customers who had good credit scores and credit characteristics in subprime loans who should have qualified for prime or FHA loans,” Paschal said.

The reasons behind Wells Fargo employees promoting only subprime mortgages to blacks applicatnts were racism and greed.

Wells Fargo employees allegedly referred to black applicants as “niggers,” “mud people,” and “people who don’t pay their bills.” Wells Fargo also called mortgages assigned to blacks “ghetto loans.” Dave Zoldak, one of Wells Fargo’s managers, called blacks “niggers,” and said they lived in “hoods” and “slums.” Wells Fargo later promoted Zoldak, the lawsuit says.

The other reason was greed. Subprime loans charge higher interest rates than the prime rate on a traditional loan. The additional percentage points of interest often translates to tens of thousands of dollars of additional interest payments over the life of a longer term loan, according to the website Investopedia.

Paschal and Elizabeth Jacobson, another former Wells Fargo loan officer, said in affidavits that Wells Fargo gave bonuses to loan officers who referred borrowers to the subprime division who should have qualified for prime-rate loans.

Jacobson said she made $700,000 one year. She was one of the most-successful subprime loan officers in the country, producing approximately $50 million in subprime loans per year between 2003 and 2007. As a reward, Wells Fargo flew her and other subprime-loan officers to luxury resorts. Jacobson and other mortgage loan officers morbidly joked “of riding a stage coach to hell” because of the subprime loans. The stage coach is Wells Fargo’s corporate symbol.

The Baltimore mayor’s office and city council are suing Wells Fargo Bank and Wells Fargo Financial Leasing, charging the companies with steering blacks into high-interest subprime mortgages that resulted in unnecessary foreclosures, according to court documents.

City officials charged that since 2000 Wells Fargo has violated the federal Fair Housing Act by targeting African Americans and residents of African-American neighborhoods with predatory lending practices. The lawsuit also alleges that Wells Fargo’s unlawful conduct resulted in unnecessary foreclosures in African-American neighborhoods “that have caused it tens of millions of dollars in direct empirically quantifiable harm.”

The lawsuit alleges that 107 of the properties sold by Wells Fargo between 2005 and 2008 currently are vacant as a result of foreclosures. In Baltimore, 69% of the foreclosed homes are located in predominately African-American neighborhoods compared with only 16% in predominately white neighborhoods.

The vacancies have led directly to squatting, loitering, crime, rat infestation, burst pipes, and a corresponding increase in the need for costly municipal responses in the form of other municipal services and police and fire response; and to neighborhood deterioration, which reduces the property tax revenue for the city, the lawsuit says. Wells Fargo Bank, one of the nation’s largest banks, is headquartered in San Francisco.

Bank officials deny any role in Baltimore’s high-foreclosure rate. “The lawsuit absolutely lacks merit,” said a Wells Fargo spokesperson. “Wells Fargo’s lending practices did not cause foreclosures or any of the many broad problems the city claims are impacting its housing market.”

A court hearing is scheduled for June 29, and Wells Fargo is seeking to have the lawsuit dismissed, but Baltimore’s attorneys filed an amended complaint with the court, showing a pattern of race discrimination in lending. Reland & Dane PLLC, a Washington law firm, is representing the city of Baltimore.

“The evidence contained in the declarations is direct and powerful. First, it goes to the heart of Baltimore’s claims of reverse redlining and demonstrates in detail how Wells Fargo used discretion in pricing and financial incentives to encourage its employees to target African Americans neighborhoods in Baltimore for deceptive, high-priced loans that resulted in unnecessary foreclosures,” the lawsuit says.

According to the filing, Wells Fargo Bank employed African-American churches in a strategy to market high-interest subprime mortgages to Baltimore’s black residents that led to huge numbers of foreclosures and the destruction of city’s African-American neighborhoods.

“One way was by directly sending marketing messages to zip codes with predominately African-American populations,” the lawsuit alleges. “It even tailored subprime marketing materials on the basis of race.”

Wells Fargo combined this strategy by working with Baltimore’s black churches. “Subprime loan officers did not market or target white churches for subprime loans,” the court documents allege. “When it came to marketing, any reference to ‘church’ or ‘churches’ was understood as code for African-American or black churches. ”