For the second time in less than a year, a major city is suing Wells Fargo for alleged discriminatory lending practices against minority borrowers.

Last year, the city of Philadelphia sued Wells Fargo for allegedly “steering African-American and Latino borrowers towards high-cost or high-risk loans even where those borrowers’ credit permitted them to obtain more advantageous loans.”

Now, Sacramento is suing Wells Fargo as well, accusing the bank of engaging in similar practices. In fact, the two cities used the exact same language to describe Wells Fargo’s alleged actions.

Last week, the city of Sacramento filed a lawsuit against Wells Fargo in U.S. District Court for the Eastern District of California, alleging that the bank violated the federal Fair Housing Act and the California Fair Employment and Housing Act by “steering African-American and Latino borrowers towards high-cost or high-risk loans even where those borrowers’ credit permitted them to obtain more advantageous loans.”

The city’s lawsuit cites the recent enforcement action taken by the Federal Reserve against Wells Fargo, which identified organizational failures at the bank that led, in part, to the bank’s fake account scandal.

“According to the Federal Reserve Board, the Bank pursued a business strategy that emphasized sales and growth without ensuring an adequate risk management and control framework, resulting in weak compliance practices which adversely impacted consumers who received a variety of financial products through Wells Fargo’s Community Bank,” the city of Sacramento noted in a release.

“The City’s case addresses the issuance of discriminatory mortgages, one of the products aggressively sold by the Bank through its widely discredited Gr-Eight cross-selling initiative,” the city continued. “Even though the Independent Directors on Wells Fargo’s Board issued a report dated April 10, 2017 outlining a long list of compliance-related failures, the Federal Reserve’s Enforcement Action demonstrates that the Bank has failed to implement adequate procedures to address these deficiencies.”

Sacramento’s complaint alleged that beginning in 2004 and continuing through the present, Wells Fargo marketed and incentive the marketing of high-cost loans to minorities.

“The incentivized loans included ‘lender credit’ loans that involve the bank paying the borrower’s closing costs in exchange for receiving a loan with a higher interest rate,” the city said. “Through this practice, the borrower must continue to pay the higher interest rate long after the ‘lender credits’ have been repaid, generating additional revenue for the bank but no additional benefits for the borrower.”

According to details provided by the city, African-American borrowers from Wells Fargo were twice as likely to receive a high-cost or high-risk loan than a similarly situated white borrower.

Additionally, the city claims that Latino borrowers were 1.45 times more likely to receive a high-cost or high-risk loan than a white borrower.

“The disparity remained stark even among borrowers with FICO credit scores above 660 as African-Americans with FICO scores greater than 660 were 2.8 times more likely to receive a high-cost or high-risk loan than a white borrower and Latino borrowers with FICO scores greater than 660 were 1.77 times more likely to receive a high-cost or high-risk loan than a white borrower,” the city said.

The city’s lawsuit seeks “equitable relief to prevent Wells Fargo from continuing to engage in discriminatory lending.”

The city is also seeking monetary damages resulting from the city’s loss of property tax revenue resulting from the “adverse impact on property values resulting from foreclosures and expenses incurred in combatting the blight on city streets resulting from the issuance of these discriminatory loans.”

Additionally, the city is also seeking relief for the “non-economic injuries inflicted by Wells Fargo,” including interference with the city’s philosophy of “promoting, sustainable, stable, and integrated communities for residents.”

In a statement provided to HousingWire, Wells Fargo said the bank plans to defend itself against Sacramento’s allegations.

“The city’s accusations against Wells Fargo do not reflect how we operate in the communities we serve,” the bank said in its statement.

“Wells Fargo has been serving the Sacramento community for more than 160 years and we will vigorously defend our longstanding record of fair and responsible lending,” the bank continued. “We deeply value our relationship with Sacramento, and are working diligently and consistently with customers, credit counselors, non-profit organizations and government agencies to expand homeownership across the credit spectrum.”

As stated above, this isn’t the first time a city sued Wells Fargo over its lending practices.

Last year, a federal Court of Appeals ruled in Wells Fargo’s favor in a similar lawsuit brought by the city of Los Angeles back in 2013, which accused Wells Fargo, Citigroup and Bank of America of discriminatory lending, alleging that the banks violated the Fair Housing Act and were to blame for a wave of foreclosures that blighted the city.

A district judge threw out the city’s lawsuit against Wells Fargo in 2015, stating that the city did not prove its case that the bank's policies led to minority borrowers ending up in higher cost loans.

And last year, the Court of Appeals upheld the lower court’s ruling.

Philadelphia’s lawsuit cited a 2017 Supreme Court decision that granted cities the right to sue banks under the Fair Housing Act, but established that the city must prove direct harm to itself caused by the lender’s actions.

That decision stemmed from a lawsuit brought by city of Miami against Bank of America, Citigroup, and Wells Fargo in 2013, which accused the banks of engaging in predatory lending to minority borrowers in the city.

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