By Brian Malcom
In case you've missed it, banks are getting a good bit of the blame for the subprime mortgage crisis. Today, the NAACP will file a suit in a Los Angeles federal court accusing Wells Fargo and HSBC of steering minorities toward subprime loans. The NAACP is expected to allege that white borrowers with the same loan qualifications received better interest rates than black borrowers.
Jesse Washington for the Associated Press reports that Austin Tighe, co-lead counsel for the NAACP, believes black homebuyers have been 3 1/2 times more likely to receive a subprime loan than white borrowers and "six times more likely to get a subprime rate when refinancing." In other words, the NAACP believes black applicants were steered into subprime loans despite having qualifications equal to white loan applicants.
Today's suit is not the first of its kind. Larry Childs, a partner at Waller Lansden, submitted an article for the 2009 Banking Law Seminar in Birmingham, Alabama a month ago today. The article, Heads You Lose, Tails You Lose: Lender Liability in the New Age of Banking, covered this recent trend of blaming the banks. Childs wrote, "[t]he cities of Baltimore, Cleveland, and Birmingham, among others, all sued lenders claiming predatory lending. The municipal/plaintiffs’ lawyer coalition have so far named national and regional lenders who have made the most loans to low-income borrowers and, consequently, have had the highest rates of default.” Childs predicted that, “[w]ith a worsening economy, litigation relating to subprime loans and predatory lending will continue to increase.”
While today’s suit by the NAACP is not being brought by a government, like the suits in Baltimore, Birmingham, and Cleveland, the suit will likely contain very similar allegations of discrimination and targeting. This suit may be a preview of a wave of litigation by private and/or non-profit organizations seeking relief from lending institutions.
Read the Associated Press article here.
Read Larry Childs’s article here: Heads You Lose Tails You Lose- Lender Liability in the New Age of Banking.pdf (177.08 kb)