Banks Shirking Responsibility for Foreclosed Property Maintenance

bank-owned-foreclosures-12New Orleans  I woke up to headlines indicating that the National Fair Housing Alliance has accused Minneapolis-based U.S. Bank of effectively “red lining” blight into largely African-American and Latino neighborhoods in 35 different cities in 15 metropolitan areas.  Recently the alliance added New Orleans, Dallas, New Haven, and Hampton Roads, Virginia to an amended complaint charging that US Bank had not maintained foreclosed properties in minority neighborhoods compared to what it does in white areas.  Similar complaints have been filed against Bank of America and Wells Fargo, though reportedly Wells Fargo settled with the group.

            So, what says U.S. Bank?  Their defense is that they are simply the corporate trustee for a security pool of investors and claim that they have no legal right to maintain the properties.   Well, I’ve been there and heard that, so at best U.S. Bank and the rest of these banks are hiding behind half-truths.   They are the legal trustee for the properties though and it’s their name on the property titles.  In reality at best U.S. Bank is trying to have its cake and eat it too.  They get paid to be the holder of the investment pool and the named owner of the mortgage properties, but they are essentially trying to sing a verse with the old rock group, Dire Straits, and “get money for nothing and get their chicks for free.” 

ACORN struggled with this problem for years and interestingly in negotiating with Deutsche Bank, which at the time in 2007-2008 was a trustee for a huge number of mortgage security pools, we learned quite a bit about how it really works. The bottom line is that the banks know the owners, and in a wink-and-nod in those days, Deutsche agreed to give us the information on specific properties that were problems in our neighborhoods when they became issues.  My point in that U.S. Bank and the other bankers are in effect earning their money by allowing the real owners and their lack of maintenance to hide behind their corporate veil, so they deserve to go down.

And, their problem just gets bigger when the fair housing alliance and others do the ground work around the country and bust them for not lifting a finger to take care of properties that are foreclosed in black and brown neighborhoods, while in fact making sure that properties are maintained in white areas. 

Call it redlining or just flat out racial discrimination, U. S. Bank and the boys can keep whining about it, but they are just shucking and jiving for the real owners and it is past time for them to do right and stop ruining our neighborhoods with callous disregard, while they count their money for doing nothing.  They can either name out the real owners or take the weight and step up.

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Wells Fargo Racial Steering and Discrimination Settlement with Justice Department

New Orleans    The recently announced settlement between the Department of Justice and Wells Fargo Bank saw them pony up $174 Million to provide restitution to 34,000 customers because of racial discrimination in lending rates and steering them into toxic subprime rates caught my eye and brought me to full attention.  This might be a case of justice delayed not having been denied.

Some years ago with ACORN after settling with Ameriquest (remember them?) and HSBC on predatory lending, Wells Fargo had come into our sights as the next biggest offender.  We found a zillion cases of families who would have been eligible for lower interest conventional loans that had ended up in subprime disasters and a lot more.  The highlight of ACORN’s National Convention in 2004 had been a march of 1500 to their skyscraper in Los Angeles only blocks away from the stunningly dramatic opera building designed by Frank Gehry.   There we handed Wells executives copies of the suit we had just filed against them on these grounds.  Based on a lot of factors including a change in various laws around class actions we finally ended up settling on a California-only basis for thousands there to receive restitution and agreement on “best practices” that would be implemented by Wells to prevent this from happening in the future.

Almost exactly one year ago in July 2011 Wells Fargo settled with the Federal Reserve for over $80 million for essentially ignoring everything that they had committed to in our settlement from 2004 to 2008.  Now one year later and almost $100 million more they are having to settle with Justice on a pattern of discrimination and steering, which would have also been precisely what they swore to us they were not doing once again.

I reached out to Sarah Siskind with Minor, Barnhill out of Chicago and Madison, who along with Neil McCarthy of San Francisco, had represented ACORN on the Wells matter as well as the earlier HSBC settlement.  My questions were:  How did Justice get them and was there anything we would have missed earlier?  Sarah speculated that with Justice records subpoena power they were able in all likelihood get access to all of Well’s borrower “profile” data including credit scores and crunch the numbers to more clearly see – and prove –the pattern or discrimination and steering by Wells into higher interest “products.”   In 2004 we only got lip service from Bush’s Justice Department on the issues.  Having a real Justice Department now obviously makes a difference because it means real investigations that even the “stonewall first” mantra of the Wells legal team and outside attorneys can’t prevent.

Of course in the Wall Street Journal Wells goes out of its way to continue to deny with every breath that they were really involved in any racial discrimination.  They seemed to have invoked the famous Richard Pryor defense:  “Are you going to believe me or your lying eyes?”

Sarah said that some were saying Justice might have settled to quickly and cheaply with “non-admissions” language, but that didn’t trouble her, and it doesn’t trouble me either.  What troubles me as we look more and more at banking in the light of other “criminal enterprises” is that this repeated litigation and settlements with ACORN before 2004 and now with both the Federal Reserve (in what was a record settlement for them 1-year ago!) and now with the Department of Justice is also evidence of a culture of discrimination and a management system that supports and encourages any means necessary, including possible racial bias, to achieve short term goals.

Somewhere in their bunker by the Bay, Wells executives need to finally learn a lesson that they seem to want to assiduously avoid no matter the hundreds of millions of dollars in fines and clean house to rid themselves of this continuing taint of bias and discrimination.

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