1-13-10: A Setback for Baltimore’s “Reverse Redlining” Suit

Two years ago, Baltimore City sued Wells Fargo, seeking damages to redress crime, lost tax revenue, and other problems that the city says resulted in part from Wells Fargo foreclosing on homes in majority African-American neighborhoods. The city claims that Wells Fargo violated the Fair Housing Act with lending practices that disproportionately targeted minorities for subprime loans–in other words, reverse redlining.

Last week, federal judge J. Frederick Motz granted Wells Fargo’s motion to dismiss, saying that the connection between the alleged reverse redlining and damages the city claimed was implausible. He did leave Baltimore the option of amending the complaint along much narrower lines.

We talk to Baltimore City Solicitor George Nilson about his plan going forward.

Maryland Morning contacted Judge Motz, who said he thought it would be inappropriate to speak about the case publicly, and Wells Fargo, whose spokesperson Kevin Waetke offered this statement:

“From the beginning, we have consistently maintained that Baltimore’s economic problems could not be attributed to the small number of foreclosures Wells Fargo has done in Baltimore. We are pleased the Court’s decision rejects the city’s claim and reflects this point of view. Judge Motz’s decision is consistent with similar cases that have been brought against lenders in Birmingham, Ala. and Cleveland that also have been dismissed.

“Wells Fargo’s long-standing vision is to help all of our customers succeed financially, and that includes lending fairly and responsibly to people across the credit spectrum who want to achieve the dream of homeownership and have the ability to repay their loans. We remain committed to working with our customers in Baltimore and in communities across the country to help those challenged with their mortgage payments, as we have done with close to half a million customers across the country over the last year.”

Listen to our June 2009 interview with George Nilson and law professor Ray Brescia about Baltimore’s suit against Wells Fargo: And don’t miss these two takes on last week’s ruling: Alain Sherter sees a condemnation of Wells Fargo’s lending practices in Judge Motz’s language, and Kevin Funnell sees a reason for banks to stand their ground against litigious cities.

Listen to the rest of Sheilah’s interview with George Nilson: