3 Loan Discrimination Litigation

Fair housing litigation is a tool to resolve illegal discrimination in the real estate and mortgage credit industries, although the standard for determining liability is high. NAR’s “Legal Pulse 2019” report highlights cases alleging discrimination in lending practices. The following is a summary of three noteworthy situations:

1. The city of Miami Gardens, Florida sued Wells Fargo, a mortgage lender, alleging that it engaged in discriminatory or predatory loans in violation of the Fair Housing Act between 2004 and 2008, on the grounds that it used rearrangement and Reverse orchestration strategy. The city claimed that Wells Fargo refused to provide credit to specific communities based on ethnicity (redesignated) and “populating minority groups with development loan products” (reverse redesign).

Result: Miami Gardens was unable to prove that it was harmed by Wells Fargo’s alleged redemption and redemption. The court ruled: β€œUndisputed evidence confirms that none of the 153 loans made by Wells Fargo [within the limitation period] have been cancelled.” Therefore, the city will not suffer any harm from these loans.

2. The U.S. Department of Justice filed a civil lawsuit against the First Commercial Bank, accusing it of violating the Fair Housing Act and the Equal Credit Opportunity Act implemented from 2011 to 2017. The lawsuit alleges that the bank illegally rewritten it by not providing mortgage credit services. The complaint also stated that the bank failed to open branches in most Black districts, refused to sell products in most Black counties, and that the proportion of loan applications and loan sources from most banks was extremely low.

Result: Both parties submitted a settlement agreement. The bank denied this allegation, but agreed to take all necessary actions to ensure that the bank provides equal opportunities to everyone to apply for and obtain credit, and hire an independent third-party consultant to evaluate its fair loan risk management plan and maintain fairness Loan monitoring plan and training for all employees.

3. Prince George’s County and Montgomery County, Maryland filed lawsuits against Wells Fargo Bank, accusing them of predatory and discriminatory residential mortgages, services, and foreclosure behaviors that violated the Fair Housing Act. In the complaint, the counties claimed that there were five types of injuries: foreclosure processing costs; increased municipal service costs; economic harm to the county’s tax base; loss of municipal income; and non-economic harm.

Result: The court ruled that the counties fully filed claims related to the foreclosure processing, but found that the so-called non-economic harm was far from the alleged discriminatory behavior, and it could not be said that Wells Fargo (Wells Fargo) Caused.