(STMW) -- Wells Fargo disproportionately targeted minorities with high-cost mortgage loans in Cook County, leading to a foreclosure crisis in the area, according to a federal lawsuit filed Friday.
The suit, filed by Cook County, alleges Wells Fargo approved high-cost, high-risk loans for women, Hispanic and African-Americans more often than others. This happened over the past decade, helping fuel many foreclosures in the county's areas, the suit said.
"The predatory and discriminatory nature of defendants' mortgage lending and servicing practices at issue are grounded in defendants' placement of their own financial interests above the best interests of their borrowers," the suit said.
Typical mortgage lenders are concerned with proper loan underwriting and the borrower's ability to repay the loan over time, the suit said. But it alleges that Wells Fargo was interested in more costly mortgage loan products that generate more income for them, but were riskier for borrowers.
As a result, the minority borrowers paid, on average, tens of thousands of dollars more for a loan than others, and were more likely to have pre-payment penalties, credit issues, loan defaults and foreclosure, the suit alleged. This not only burdened borrowers, but forced the county to alleviate areas blighted by foreclosed homes, the suit said.
Damages could add up to about $300 million, the suit claims.
Wells Fargo spokesman Tom Goyda said the accusations are "baseless."
"... It's disappointing they chose to pursue a lawsuit against Wells Fargo rather than collaborate together to help borrowers and home owners in the County," Goyda said in a statement.
Wells Fargo's has an $8.2 million down payment assistance grant program that is responsible for creating 547 new homeowners in the county over the past two years, Goyda said.
"We will vigorously defend ourselves and continue to focus on helping customers succeed financially and expanding homeownership in Illinois and across the United States," he added.
The suit demands the alleged discriminatory actions be stopped. The county also seeks an unspecified amount in punitive damages.
(Source: Sun-Times Media Wire © Chicago Sun-Times 2014. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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