Nearly 9,000 homeowners facing foreclosures will get help paying off their loans after they were allegedly swindled into high-cost mortgages by lender Wells Fargo Bank. But the hundreds of families who lost their homes because the same company charged them more interest based on the color of their skin are still waiting for justice.
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Yesterday, Wells Fargo Bank settled its lawsuit with Illinois and seven other
states, agreeing to give Illinois $39.5 million to make up for
deceptive marketing practices for payment option adjustable-rate
mortgages (POA). Bloomberg Businessweek describes POAs as the "riskiest and most complicated home loan product ever created."
These loans offer borrowers extremely low minimum payments, but when
homeowners pay the minimum it adds to their entire balance. When their
balance reaches new heights, the minimum payment resets accordingly -
sometimes triple or quadruple what they thought their mortgage payment
was going to be.
Although Wells Fargo admitted no wrongdoing, the settlement is a win
for Illinois homeowners who were deceived into signing on the dotted
line. But the state is still hoping to win a much larger lawsuit, one that
alleges that the same company targeted black and Latino homeowners with high-cost, high-risk mortgages.
A Chicago Reporter investigation revealed how Wells Fargo offered very different loans to black people than to others. Take a look at this map, which shows the percentage of high cost mortgages like POAs around Chicago:
Think the disparities are all about money? Not so fast. The data actually shows that the wealthiest black homeowners got these high-cost loans more than the poorest white borrowers did. Nationwide, African
Americans earning more than $300,000 were more likely to get high-cost loans
than Asian, Latino and white borrowers earning less than $40,000.
It's no secret now that foreclosures wreak havoc on a community. But in black communities, where the history of redlining, white flight and discriminatory practices have already led to a lack of wealth, foreclosures may be zapping people and communities of the little wealth they may have had.
Despite the notion that racial prejudice has been declining in the U.S., the wealth gap between white and black families is widening. A 2007 study out of Brandeis University says the divide has quadrupled over a generation, leaving black families without the money to send their kids to college, to invest in businesses or to get them through tough economic times.
I'm glad that some Illinois homeowners will get some relief from this settlement. But will Wells Fargo ever really pay for the damage done to black people and communities in Chicago?