Over the last few years, several banks have been sued for violating the Fair Housing Act of 1968 due to their predatory lending practices. Recently, the City of Philadelphia joined in and filed a lawsuit on May 15 in the U.S. District Court for the Eastern District of Pennsylvania against Wells Fargo and Company. While Wells Fargo denies violating the Fair Housing Act, it is alleged in the suit that the bank used predatory lending practices aimed at minority mortgage borrowers. This comes on the heels of a scandal last year that involved Wells Fargo bankers opening bogus accounts in customers’ names.
The allegations in the complaint allege that Wells Fargo Bank guided Hispanic and black borrowers into risky loans with higher than normal interest rates even though the borrowers qualified for better loans and lower interest rates. The lawsuit also alleges that the bank made it hard for the borrowers to refinance their mortgages to obtain a better deal on their mortgage loans.
The City of Philadelphia alleges that because of the bank’s actions against these borrowers, people lost their homes to foreclosures, causing blight in minority neighborhoods. The city alleges that this situation has led to lower property values in the affected neighborhoods along with higher crime rates. The lawsuit asks for an undisclosed amount of money along with an injunction to stop the bank from using discriminatory practices in lending.
The practices that Wells Fargo is alleged to have been involved in are called redlining, a practice in which banks draw red lines around neighborhoods that, due to ethnicity or race, they don’t want to lend money to. This practice is illegal and is prohibited by the constitution. Wells Fargo denies the allegations in the suit and maintains that the bank engages in fair lending practices.
Philadelphia-based attorney, Karl Heideck, is a 2009 graduate with honors of the Temple University Beasley School of Law with his Juris Doctor and obtained his Bachelor of Arts in English language and literature from Swarthmore College in 2003. His law practice is focused on civil litigation and compliance and risk management.
Karl Heideck currently works at the law firm of Grant & Eisenhower PA. and he has been involved in banking litigation and securities fraud cases with a focus on liquidity, acquisitions, risk management, and transactions issues related to the mortgage crisis of 2008.