On Monday, Wells Fargo & Co. (WFC) was reportedly charged by the Memphis City Council and Shelby County Commission, under the Fair Housing Act, for unfair, deceptive and discriminatory mortgage-lending practices in that market. The company has been sued for picking up a minority section of people in the area, for exercising its mortgage-lending programs that insignificantly increased the number of foreclosures through discriminating policies.
The matter took a bad shape since the people in the area are facing the plight of inadequacy in loan payments to the bank amid weak real estate market. This has resulted in vacancies, diminishing property values and declining tax revenue. Hence, the civil litigation has charged WFC for initiating poor quality of mortgage-lending policies resulting in further deterioration of the economic condition in the area.
The opposition party has asked the court to restrict WFC to take remedial actions by ceasing the foreclosure and paying for the damage control, though no specific amount has been disclosed. However, WFC has dismissed the allegations stating that since its inception, the company has always followed fair policies that are consistently scanned by the internal and regulatory authorities. Moreover, WFC believes that it is a socially responsible banking corporation and has never stuck to discriminating lending policies deliberately. As well, a sole loan provider cannot be charged for the deteriorating property trends that are being witnessed on a macro level.
WFC is relatively well positioned compared to its peers such as US Bancorp. (USB) and The Bank of New York Mellon Corp. (BK) as it benefited from a larger share in the mortgage markets after acquiring Wachovia as well as from the demise of some smaller players. We believe that the company will efficiently be able to deal with such lawsuits.
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