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Wells Fargo Lawyers
Ride Shotgun
The city of Baltimore accuses Wells Fargo of reverse red-lining when the giant lender targeted African-American communities offering first-time home buyers the opportunity to own a slice of the American pie - "Home Ownership." The city claims the bank intentionally roped unsuspected borrowers into sub-prime loans when they could otherwise qualify for more traditional financing at lower rates and costs. The city believes Wells Fargo's actions contributed to the areas high rate of foreclosure.
Far be it from me to condone or condemn Wells Fargo as it relates to the practice of racial reverse red-lining. But under the circumstances, and given the tumultuous results, I can understand why this group of home buyers feel victimized and violated. However, the actions of Wells Fargo reach beyond our African-American brothers and sisters in Baltimore. In fact, this issue eclipses Wells Fargo; it includes the entire lending industry, and all races of borrowers.
We have to travel back to the beginning of the century to understand what's taking place in Baltimore. Starting in 2000, lasting for six years, the real estate/housing industry played a substantial roll in the national economy, contributing 20% to our GDP. That means one dollar out of every five dollars in circulation was a result of profits associated directly or indirectly with the real estate business. FYI- real estate as twenty percent of GDP has never happened before.
Thanks to the real estate 'gold rush', trillions of dollars attracted millions of people to the industry, which many got rich quick, in spite of their lack of knowledge. If you could fog a mirror you were a Realtor®, or a loan officer. It's only a guess, but I estimate 60% of the industry's membership was comprised of rookies.
By the fourth quarter of 2005, the housing market began to stall, in late 2006 the rookies received a rude awakening; the days of borrowers breaking down the doors for a loan was over, now it's time to hit the street and find some new customers.
Even though the rookies had been in the business for four to six years, they didn't make the effort to get to know the Realtors®. Developing a referral relationship with Realtors® is the backbone for a loan officer's business. Without the referral stream the newbie resorted to beating the bushes to find perspective home buyers in order to continue the $200,000 - $400,000 lifestyle they had come to enjoy. In addition, costs associated with supporting the massive infrastructure, put in place over the previous six years pressured corporate to push for more business as activity slowed.
By 2007, most aware people knew about the opportunities of homeownership and had already bought a home. However, many socioeconomically disadvantaged people hadn't been exposed to the possibilities of real estate and homeownership. This provided lenders with a much needed new client base, a group that was eager to be part of the American Dream of Homeownership.
I believe the color of one's skin had little to do with lenders targeting a particular group of potential home buyers, but had everything to do with meeting lender's sales goals in order to keep business moving. What took place in Baltimore happened in almost every city across the country. If it wasn't African-Americans, it was Hispanics, Asians, or another group unaware and surprised they too could be part of the American Dream.
I attended a Wells Fargo homeownership seminar back in early 2007. Of the thirty or so attendees, the one commonality they shared was naïveté. It did not matter the skin color, all races received the same message; Wells Fargo has issued a mandate to provide X millions of dollars in loans to increase American homeownership, and now that home values have dropped 10% it has never been a better time to buy.
Well here's the truth - 99.9% of the real estate industry either didn't see the housing meltdown coming or refused to acknowledge it. For the most part they are innocent of wrong doing due to inexperience and ignorance. One tenth of one percent of the industry recognized a big problem was developing, but their voices were drown out by the greed of the masses.
I believe the millions of foreclosures spanning all boarders and cutting across all racial lines is evidence we have all been reverse-redlined.
I'm Phil Cates, founder of www.StJosephStatue.com.
Phil Cates, founder
StJosephStatue.com, LLC
THINK BIG THINK SOLD - Thank You St. Joseph!
Phil Cates has been in the real estate and mortgage industires for over 20 years. He is also the founder of StJosephStatue.com. For more information and back ground, click here.
You can email Phil at: philcates@stjosephstatue.com
The above information is provided purely for educational purposes and not to be construed as legal or financial advice.
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