Wells Fargo targeted by ACORN report
A local working family of three living in the inner city refinanced their home, hoping to lower their interest rates. Instead, they lost thousands of dollars in equity.
That’s what a report released by a watchdog group says was done to them and other families by Wells Fargo Financial, accused of being “a runaway stagecoach” because of excessive interest rates, penalties and loan flipping.
“Basically, Wells Fargo is giving predatory loans concentrated in minority and low-income communities,” said Will Ward with the Nevada office of the Association of Community Organizations for Reform Now (ACORN). “Typically, what we see in predatory lending is the lenders are looking to cash in on the equity.”
Ward said his Washington-based group has seen “scenarios where people are being sent live checks in their mailbox—$5,000 to $10,000—secured by their property. All they have to do is sign. They’ve received no counseling.”
Ward said that’s the kind of business practice association officials believe “is very predatory” and the “kind of thing that’s taking place through Wells Fargo Financial.”
In Nevada, the national study shows that in 2003, black borrowers were denied conventional loans at a rate of 22.3 percent, Hispanics were denied at a rate of 21.2 percent, but white borrowers were denied at a rate of 12 percent.
When Ward sat down in mid-April with a low-income North Las Vegas black couple in their 50s, he said he learned they’d gotten a mortgage in 2001 with Wells Fargo—the fourth largest bank in the country.
“Here we are in 2005, and the family is on their third loan because Wells Fargo has solicited them refinancing to give them a lower interest rate,” Ward said about the family, who lives off of Civic Center Drive and not far from North Las Vegas’ downtown area.
The problem, Ward said, is that while the couple, which has one son, refinanced at a lower interest rate, more fees were charged on the front end. “We estimated they lost about $20,000 in equity,” he said, “because they were paying fees every time the loan was flipped.”
The case is similar to others, he said, and troubling enough for the association to do a study tracking Wells Fargo’s business practices when it comes to lending money for mortgages.
ACORN’s report includes strong language, pointing to Wells Fargo financing in the past as “the largest payday lenders, check cashers and pawn shops in the country, such as Ace Cash Express, Dollar Financial, Advance America and Cash America. Wells Fargo has facilitated the abusive and harmful lending of one of the nation’s most notorious mortgage companies, First Alliance Mortgage Company.”
Wells Fargo officials, on the other hand, are yelling foul. First of all, said Natalie Mitchell, a spokeswoman for Wells Fargo in Las Vegas: “The report is based on two-year-old information. Wells Fargo offers prime and non-prime loans in all neighborhoods—the accusation that we target certain loan products to certain neighborhoods is totally false. … Wells Fargo is a responsible lender; we have comprehensive safeguards in place for non-prime mortgage lending.”
In 2003, according to a statement from Wells Fargo, the bank funded $470 billion in mortgage loans—the vast majority of which originated from Wells Fargo Home Mortgage, not Wells Fargo Financial.
“An inherent flaw in the study is that it attempts to equate non-prime lending with predatory lending,” Wells Fargo’s statement said.