allegations brought against it by the Illinois Attorney General. A copy
of the court's Memorandum and Order is attached.
As you may recall, Attorney General Lisa Madigan filed a lawsuit against
various Wells Fargo entities, alleging that these entities participated in
illegal discrimination against African American and Latino homeowners by
providing them with high-cost subprime mortgage loans while white
borrowers with similar incomes received lower cost loans. Please see our
prior update below for more information.
The court dismissed the allegations against Wells Fargo and Company for
lack of personal jurisdiction. The Court also dismissed the Illinois AG's
allegations under the Illinois Fairness in Lending Act, 815 ILCS 120, et
seq. ("IFLA"). The IFLA claim sought to enjoin the Wells Fargo
defendants, but that statute only allows injunctions against natural
persons.
However, the court denied the Wells Fargo defendants' motion to dismiss as
to the Illinois AG's allegations under the Illinois Human Rights Act, and
under the state's UDAP and UDTPA statutes.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
NOTICE: We do not send unsolicited emails. If you received this email in
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______________________________________________________
Subject: FYI: IL AG Sues Wells Fargo for Alleged Discrimination in
Mortgage Lending
Date: Mon, 3 Aug 2009 14:21:03 -0500
From: Ralph T. Wutscher <rwutscher@kw-llp.com>
Attorney General Lisa Madigan filed a lawsuit in state court in Chicago,
Illinois against Wells Fargo and Company; Wells Fargo Bank, N.A., also
doing business as Wells Fargo Home Mortgage; and Wells Fargo Financial
Illinois, Inc., claiming these entities participated in illegal
discrimination against African American and Latino homeowners by providing
them with high-cost subprime mortgage loans while white borrowers with
similar incomes received lower cost loans. Copies of the complaint and
related documents are attached.
Madigan's lawsuit, which reportedly is the result of an investigation into
possible violations of fair lending and consumer fraud laws, cites
supposed "marked disparities in Wells Fargo's lending data."
The lawsuit also follows a recent Chicago Reporter analysis of mortgage
data submitted by Wells Fargo to the federal government. That study found
that, in 2007, Wells Fargo sold high-cost, subprime loans more often to
its highest-earning African-American borrowers in Chicago than to its
lowest-earning white borrowers. According to the study, in 2007, about 34
percent of African Americans earning $120,000 or more received high cost
mortgages from Wells Fargo in the Chicago metro area, while less than 22
percent of white borrowers earning less than $40,000 received high-cost
mortgages from the lender.
The complaint alleges that Wells Fargo "established highly discretionary
lending policies and procedures with weak oversight that permitted Wells
Fargo's employees to steer African-Americans and Latinos into subprime
loans." The AG further alleges that Wells Fargo's discretionary policies
and procedures included a compensation structure that rewarded employees
for placing borrowers into high-cost mortgages. The complaint also
alleges that Wells Fargo targeted African-American borrowers for the sale
of high-cost loans by hosting a series of "wealth building" seminars in
cities throughout the country, including Chicago.
Attorney General Madigan noted that high-cost, subprime loans of the kind
sold by Wells Fargo are "defaulting and going into foreclosure in record
numbers, and are largely responsible for triggering the worst economic
recession in recent memory."
Additionally, the lawsuit alleges that Wells Fargo Financial Illinois, a
subsidiary of Wells Fargo and Company that allegedly primarily originated
subprime loans, and supposedly engaged in unfair and deceptive business
practices by misleading Illinois borrowers about their mortgage terms,
misrepresenting the benefits of refinancing, and repeatedly refinancing
loans, also known as loan flipping, without any real benefit to consumers.
Also, the complaint alleges that Wells Fargo Financial used supposedly
deceptive mailings and marketing tools to confuse borrowers as to which
division of Wells Fargo and Company they were doing business with - prime
or subprime. As a result, the complaint alleges, borrowers believed they
were doing business with Wells Fargo Home Mortgage, which offered mainly
prime loans, when in fact they were dealing with Wells Fargo Financial, a
predominantly subprime lender.
The complaint alleges violations of the Illinois Human Rights Act, the
Illinois Fairness in Lending Act, and the Illinois Consumer Fraud and
Deceptive Business Practices Act, and asks the court to rescind all
contracts entered into between Wells Fargo and Illinois consumers by the
use of methods and practices declared unlawful and to grant full
restitution to the consumers. In addition, the lawsuit asks the court to
impose civil penalties for the violations, permanently enjoin Wells Fargo
from conducting the alleged illegal activity, and order Wells Fargo to pay
court costs and attorneys' fees.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
NOTICE: We do not send unsolicited emails. If you received this email in
error, or if you wish to be removed from our update distribution list,
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