Illinois Subpoenas Countrywide, Wells Fargo
Attorney General Lisa Madigan has issued subpoenas to Countrywide Home Loans, Inc., and Wells Fargo Financial Illinois, Inc., to determine whether the lenders unfairly steered African American and Latino borrowers into higher cost home loans in violation of fair lending and civil rights laws. The study also found marked disparities in loan pricing between white and non-white borrowers, with African American borrowers three times as likely as white borrowers to receive a high-cost home loan and Latino borrowers twice as likely...According to the Chicago Reporter study, the wealthiest African American homeowners are still more likely than the poorest white borrowers to get placed in high-cost loans.
Illinois Subpoenas Countrywide, Wells Fargo
Were Africa-American, Latino homeowners steered to high-cost loans?
March 7, 2008
Attorney General Lisa Madigan has issued subpoenas to Countrywide Home Loans, Inc., and Wells Fargo Financial Illinois, Inc., to determine whether the lenders unfairly steered African American and Latino borrowers into higher cost home loans in violation of fair lending and civil rights laws. The study also found marked disparities in loan pricing between white and non-white borrowers, with African American borrowers three times as likely as white borrowers to receive a high-cost home loan and Latino borrowers twice as likely.
Madiganâs probe follows a Chicago Reporter study finding that the Chicago area led the country in high-cost home loans for the second year in a row.
Mortgage Crisis? Act Now to Avoid Foreclosure
⢠Illinois Subpoenas Countrywide, Wells Fargo
⢠Bernanke Urges Banks To Forgive Some Mortgage Debt
⢠Cuomo's Cure for Mortgage Malaise
⢠Bankruptcy Filings Soared in February
⢠New Home Sales Sink In January
⢠Mortgage Applications Drop 20% in a Week
⢠FDIC Staffs Up to Handle Bank Failures
⢠Prices Surging, Consumer Confidence Plunging
⢠January Home Sales Down 23% from Last Year
⢠Banks Pulling Back on Home Equity Loans
⢠Conference Board Bullish on Economy
⢠Home Sales Plummet in 4th Quarter
⢠Fewer Consumers Getting Mortgages
⢠Foreclosures Up In Most Urban Metros Last Year
⢠ACORN, Countrywide Tweak Subprime Relief Plan
⢠Fed Survey Finds Banks Tightening Credit
⢠House-Swapping Trend Emerges
---
⢠More ...
âThe difference in cost between the home loans sold to white borrowers and those sold to African American and Latino borrowers is alarming,â said Madigan, noting that income level does not appear to account for the differences in pricing. According to the Chicago Reporter study, the wealthiest African American homeowners are still more likely than the poorest white borrowers to get placed in high-cost loans.
âThe aim of these investigations is to find out the reasons for these pricing disparities and, if those reasons are not based on valid underwriting criteria and creditworthiness, to hold the lenders responsible for their actions,â said Madigan.
The data in the study come from the Home Mortgage Disclosure Act, a federal law that requires lenders to submit data on home purchase, home improvement and home refinancing loans to the government.
The study looked at data on âhigh-costâ loans â loans with an interest rate at least three percentage points above the U.S. Treasury standard. The high-cost loans examined in the study have characteristics similar to the high-risk subprime mortgages whose skyrocketing failure rates are driving the current home foreclosure crisis in Illinois and the nation.
Countrywide Financial, Corp. and Wells Fargo & Company showed the highest disparities in the Chicago Reporter study.
From 2004 to 2006, Wells Fargo & Co., the parent company of Wells Fargo Financial Illinois, sold high-cost loans to 64 percent of its African American borrowers and 36.7 percent of its Latino borrowers, while only 17.5 percent of Wellsâ white borrowers received high-cost loans.
Wells Fargo Financial Illinois, Inc., sells home loans in Illinois under the stateâs Consumer Installment Loan Act. In 2006, Wells Fargo & Co. did approximately half of its subprime mortgage lending in Illinois through this state-licensed entity and the other half through its national bank.
In the same study period, Countrywide Financial Corp., the parent company of Countrywide Home Loans, Inc., sold high-cost loans to 50.9 percent of its African American borrowers and 33.8 percent of its Latino borrowers in the Chicago area, while placing only 20.6 percent of its white borrowers in high-cost loans.
In 2006, Countrywide Financial Corp. sold nearly all of its home loans in Illinois through Madiganâs target, Countrywide Home Loans, Inc. Countrywide Home Loans operates in Illinois under a license from the Illinois Department of Financial and Professional Regulation.
Chicago area foreclosures remain largely concentrated in highly minority communities. The Woodstock Institute recently found that minority communities contain less than 14 percent of the Chicago areaâs mortgageable properties but account for 34.5 percent of the areaâs foreclosure filings.
State Senator Jacqueline Collins, who has worked extensively on legislation to protect homeowners from predatory lending practices and whose district on Chicagoâs South Side has been hit hard by the foreclosure crisis, applauded Madiganâs announcement.
âWhile predatory mortgage lending affects us all, it is especially devastating to neighborhoods with large minority populations,â said Collins. âWhen the disparities between African American and white borrowers are this extreme, itâs imperative that lenders explain why.â
The Rev. Jesse Jackson said that Madiganâs investigations send a strong signal to mortgage lenders. âIn an era when the federal government has all but stopped conducting fair lending investigations, itâs vital that lenders know that state officials like Attorney General Madigan are keeping a close eye on how they treat minority borrowers. She brings to this case integrity, strength and vision,â said Jackson.
Madigan issued subpoenas to the two companies pursuant to her authority under the Illinois Human Rights Act and the Illinois Consumer Fraud and Deceptive Business Practices Act.
Madiganâs subpoenas ask Countrywide and Wells Fargo for a range of information related to home loans the companies have sold in Illinois, including the borrowerâs race or ethnicity, the cost and features of the loan, and the location of the residential property. The subpoenas additionally ask for information related to each borrowerâs creditworthiness, including the borrowerâs FICO score and debt-to-income ratio.
The fair lending subpoenas continue Madiganâs probe of Countrywideâs lending practices. In September 2007, she issued a subpoena to Countrywide to determine whether the company had fraudulently or deceptively placed Illinois homeowners into loans they could not afford. The investigation into Countrywideâs loan origination practices is ongoing.
http://www.consumeraffairs.com/news04/2008/03/il_countrywide.html |