US District Judge J. Frederick Motz of Maryland on Wednesday granted Wells Fargo‘s (WFC) motion to dismiss a lawsuit filed by the City of Baltimore almost two years ago — on Jan. 8, 2008 — that alleged the bank’s lending practices led to economically damaging foreclosures. According to a review of the judge’s order by HousingWire, the original complaint by Baltimore alleged Wells Fargo engaged in “reverse redlining,” which involves the marketing and sale of more expensive and risky mortgage products to low-income and minority communities than to affluent, white communities. This practice, Baltimore claimed in the suit, led to disproportionately high rates of foreclosure in African American communities, causing vacancy and neighborhood blight, increased criminal and gang activity in affected neighborhoods as well as value decline of nearby properties and increased city expenditures for police and fire protection. The City alleged in its complaint that, of “more than 33,000” foreclosure filings since 2000, between 16,000 and 30,000 homes were vacant at the time. But, as the judge found, the City identified only 401 properties with Wells Fargo loans that foreclosed between 2005 and 2008, 163 of which were located in African American neighborhoods and became vacant after the loans were initiated. The judge’s order also points out that Baltimore asserts only eight of these properties are now vacant. “Thus, using the City’s own figures, Wells Fargo is responsible for only a negligible portion of the City’s vacant housing stock,” the order reads. “This fact alone demonstrates the implausibility of any alleged causal connection between Wells Fargo’s alleged reverse redlining activities and the generalized type of damages claimed by the city… . Moreover, the alleged connection is even more implausible when considered against the background of other factors leading to the deterioration of the inner city, such as extensive unemployment…widespread drug use, and violence.” The mortgage arm of Wells Fargo issued a statement shortly following the Judge’s order. “From the beginning, we have consistently maintained that Baltimore’s economic problems could not be attributed to the small number of foreclosures Wells Fargo has done in Baltimore,” said Cara Heiden, co-president of Wells Fargo Home Mortgage, in an e-mailed statement. “We are pleased the Court’s decision rejects the city’s claim and reflects this point of view.” Heiden added: “We remain committed to working with our customers in Baltimore and in communities across the country to help those challenged with their mortgage payments, as we have done with close to half a million customers across the country over the last year.” The judge’s decision to dismiss the case comes as another foreclosure-related lawsuit is underway. According to the claims of former employees, Wells used reverse redlining in economically disadvantaged neighborhoods across Memphis and surrounding Shelby County. The judge’s decision in the Baltimore case leaves the City the option of filing a second, amended complaint with narrower claims, should it choose to do so. Write to Diana Golobay.
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