UPDATE: Read the affidavits here.
Meet Beth Jacobsen and Tony Paschal, two of Wells Fargo‘s top subprime loan officers, who recently gave affidavits detailing the bank efforts to needlessly steer minority Baltimore families into subprime loans. The banks shady dealings include setting up a special unit to target “mud people” with outrageously expensive “ghetto loans;” targeting black churches leaders because they “had a lot of influence and could convince congregants to take out subprime loans;” and offering cash bounties to loan officers who issued subprime loans to minority communities. And it gets so much worse…
Loan officers employed other methods to steer clients into subprime loans, according to the affidavits. Some officers told the underwriting department that their clients, even those with good credit scores, had not wanted to provide income documentation.
“By doing this, the loan flipped from prime to subprime,” Ms. Jacobson said. “But there was no need for that; many of these clients had W2 forms.”
Other times, she said, loan officers cut and pasted credit reports from one applicant onto the application of another customer.
These practices took a great toll on customers. For a homeowner taking out a $165,000 mortgage, a difference of three percentage points in the loan rate – a typical spread between conventional and subprime loans – adds more than $100,000 in interest payments.
“They confirm our worst fears: that this is not just a case based on a review of numbers and a statistical analysis,” said the city solicitor, George Nilson. “You don’t have to scratch your head and wonder if maybe this was just an accident. The behavior is pretty explicit.”
The affidavits come as part of a pending federal lawsuit from the NAACP, which has filed class action suits against over a dozen banks for racist lending practices.
Bank Accused of Pushing Subprime Deals on Blacks [The New York Times]