Get real, City of Baltimore. You are suing a bank for making loans? Maybe somebody missed a day in personal finance class, but that is what banks do.
The City sued Tuesday claiming a bank aided and abetted the mortgage crisis by issuing loans to African American residents who could not afford them. Baltimore wants to stanch the resulting property tax hemorrhage with Wells Fargo money.
But suing Wells Fargo obviously is a shakedown. Its purpose is not justice but squeezing money out of a huge corporation trapped in a system that makes it cheaper to settle than fight.
That does not mean Wells Fargo or any other lending institution should be off the hook. The whole subprime mortgage mess they inflicted on America is going to cost us all a lot for a long, long time. It?s going to cost us all more in property taxes. Worst of all it?s going to cost us in social decay and disillusionment among those citizens sucker punched by the American Dream, and the rest of us dragged down if the crisis pushes America into recession.
Circumstantial evidence shows foreclosure rates for Wells Fargo loans in African-American neighborhoods almost two times the city average. But many mortgage companies lowered lending standards in recent years and then quickly sold the debt to the secondary market to get rid of the risk.
What?s clear is the city is late to respond to the crisis. Since 2000, foreclosure filings have been issued for more than 33,000 homes, contributing to the abandoned housing problem here. One study has found that each foreclosure costs the city about $34,199 because of neighborhood deterioration, crime and other problems.
Why wasn?t Mayor Martin O?Malley pressuring state Department of Labor, Licensing and Regulation to better scrutinize lenders in the state? A recent Department of Legislative Services audit found the DLLR department responsible for monitoring and auditing lenders negligent in performing its basic duties. If the city had made a stink fewer homeowners would be facing foreclosure today from all banks in the state.
Not to be cynical, but we wonder if the City, like many others during the heyday of subprime lending, became greedy and thought it would reap a huge property tax windfall from Wells Fargo and other lenders who extended credit to people who never would have met prime standards.
Housing groups and religious organizations are doing the right thing now by spreading awareness of options for those facing foreclosure. But where were they when the bad loans went down? And didn?t activists put tremendous pressure on banks for redlining areas out of loans because of race? Now they accuse banks of redlining those areas in?
Any lawsuit in this subprime mortgage fiasco is ludicrous. If the worst of allegations are true, people committed crimes. They should be prosecuted to the fullest extent of the law.
