We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Wells Fargo Sees a Silver Lining in Discrimination Lawsuit
Read MoreHide Full Article
Recently, relating to a discrimination lawsuit filed against Wells Fargo (WFC - Free Report) by the city of Philadelphia in May 2017, U.S. District Judge Anita Brody, in Philadelphia, asked the city to produce information about the 1,067 foreclosed-mortgage loans involved in the suit.
Earlier this week, the federal judge ordered the city to produce “enough information to identify each specific loan that the city alleged to be discriminatory in its complaint.” The deadline provided for the same is till Oct 5.
Further, the city’s motion received rejection, under which it had demanded from the court to induce Wells Fargo for providing documents and data of correspondent loans where the latter had purchased debt, although it did not play any role in the credit decision. Moreover, the city’s claims included allegations on Wells Fargo for setting the terms and/or pricing under the Fair Housing Act on these loans as per the bank’s needs though originated by third-party correspondent lenders.
Additionally, per Brody, the city's original complaint, which stated the city “specifically avoided seeking redress for injuries resulting from foreclosures on mortgages originated by lenders other than Wells Fargo” has to be revised for getting the information.
Spokespersons for both Wells Fargo and the city of Philadelphia have refrained from commenting on this matter.
Background
In May 2017, a federal lawsuit was filed against Wells Fargo by the City of Philadelphia accusing the former of engaging in discriminatory lending practices.
The city argued that the bank had purposely provided the minorities with riskier loans, carrying high interest rates, even though they were eligible for cheaper loans. In an analysis conducted on the bank, it was revealed that about 23% of loans given to the African-American and Latino borrowers were risky and costly, while for the whites it represented only 7.6%.The complaint also noted that officials of the bank were aware of such practices.
It was noted that the U.S. Department of Justice and some of the other cities such as Los Angeles, Oakland, Miami, Baltimore, Memphis and Miami Gardens filed similar lawsuits against Wells Fargo. While some of these have already been resolved, others are continuing.
The above-mentioned lawsuit pursues “equitable relief” by asking the bank to end these unfair lending practices. Further, the city seeks monetary compensation, given its loss of property taxes on abandoned properties and lowered value of foreclosed properties.
Nevertheless, the bank has declined these charges, claiming those to be “unsubstantiated accusations.” It promises to have fairly conducted business in Philadelphia over the last 140 years. Additionally, Wells Fargo had requested to rescind the suit in July 2017 as the city failed to prove the allegations, but was denied by Brody in January.
Latest Proceedings
Wells Fargo again filed a motion this June claiming the city has failed to identify the loans alleged as discriminatory. Furthermore, the number of loans claimed was later reduced to 506 by the city from the previously-claimed 1,067.
“Thus, this motion should be granted and the city should be compelled to answer interrogatories and produce documents concerning the 1,067 loans specifically alleged,” Wells Fargo stated in its motion.
Nonetheless, the city claims the bank’s request to be “lacking merit" and believes it should be denied.
"The city has already provided Wells Fargo with every piece of raw data underlying the relevant allegations in the complaint, provided a description of the statistical analyses performed that led to the allegations, agreed to provide information on the particular loans mentioned in the complaint and explained at length that additional material demanded by Wells Fargo is protected from disclosure by the work product doctrine and Federal Rules of Civil Procedure," court documents note.
In addition to the above, in the latest move, a motion has been filed by the city on Aug 9, requesting Brody to demand audits and audit-related documents associated with Wells Fargo’s FHA compliance relating to underwriting, buying, or selling loans to minority residents of Philadelphia. However, no action has been taken by Brody on the same.
Conclusion
This San Francisco-based banking giant has been embroiled in a slew of scandals, for more than one and a half years now. Troubles have been mounting at Wells Fargo since the revelation of the sales scandal, which was followed by disclosure of issues in its auto-insurance business, online bill-pay services, and the Wealth and Investment Management segment. With the ongoing review process of business practices, more wrongdoings may be reported, consequently straining the top line.
Among other mortgage lenders — Citigroup (C - Free Report) , JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) — have also been sued for discrimination in lending practices. Deutsche Bank AG had also been previously accused by Los Angeles of letting foreclosed homes in low-income regions deteriorate to poor conditions. The case was settled in June 2013.
Wells Fargo’s performance over the past year reflects investors’ disappointment. Shares of this Wall Street biggie have gained 13.5%, underperforming the industry’s rally of 16%.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Wells Fargo Sees a Silver Lining in Discrimination Lawsuit
Recently, relating to a discrimination lawsuit filed against Wells Fargo (WFC - Free Report) by the city of Philadelphia in May 2017, U.S. District Judge Anita Brody, in Philadelphia, asked the city to produce information about the 1,067 foreclosed-mortgage loans involved in the suit.
Earlier this week, the federal judge ordered the city to produce “enough information to identify each specific loan that the city alleged to be discriminatory in its complaint.” The deadline provided for the same is till Oct 5.
Further, the city’s motion received rejection, under which it had demanded from the court to induce Wells Fargo for providing documents and data of correspondent loans where the latter had purchased debt, although it did not play any role in the credit decision. Moreover, the city’s claims included allegations on Wells Fargo for setting the terms and/or pricing under the Fair Housing Act on these loans as per the bank’s needs though originated by third-party correspondent lenders.
Additionally, per Brody, the city's original complaint, which stated the city “specifically avoided seeking redress for injuries resulting from foreclosures on mortgages originated by lenders other than Wells Fargo” has to be revised for getting the information.
Spokespersons for both Wells Fargo and the city of Philadelphia have refrained from commenting on this matter.
Background
In May 2017, a federal lawsuit was filed against Wells Fargo by the City of Philadelphia accusing the former of engaging in discriminatory lending practices.
The city argued that the bank had purposely provided the minorities with riskier loans, carrying high interest rates, even though they were eligible for cheaper loans. In an analysis conducted on the bank, it was revealed that about 23% of loans given to the African-American and Latino borrowers were risky and costly, while for the whites it represented only 7.6%.The complaint also noted that officials of the bank were aware of such practices.
It was noted that the U.S. Department of Justice and some of the other cities such as Los Angeles, Oakland, Miami, Baltimore, Memphis and Miami Gardens filed similar lawsuits against Wells Fargo. While some of these have already been resolved, others are continuing.
The above-mentioned lawsuit pursues “equitable relief” by asking the bank to end these unfair lending practices. Further, the city seeks monetary compensation, given its loss of property taxes on abandoned properties and lowered value of foreclosed properties.
Nevertheless, the bank has declined these charges, claiming those to be “unsubstantiated accusations.” It promises to have fairly conducted business in Philadelphia over the last 140 years. Additionally, Wells Fargo had requested to rescind the suit in July 2017 as the city failed to prove the allegations, but was denied by Brody in January.
Latest Proceedings
Wells Fargo again filed a motion this June claiming the city has failed to identify the loans alleged as discriminatory. Furthermore, the number of loans claimed was later reduced to 506 by the city from the previously-claimed 1,067.
“Thus, this motion should be granted and the city should be compelled to answer interrogatories and produce documents concerning the 1,067 loans specifically alleged,” Wells Fargo stated in its motion.
Nonetheless, the city claims the bank’s request to be “lacking merit" and believes it should be denied.
"The city has already provided Wells Fargo with every piece of raw data underlying the relevant allegations in the complaint, provided a description of the statistical analyses performed that led to the allegations, agreed to provide information on the particular loans mentioned in the complaint and explained at length that additional material demanded by Wells Fargo is protected from disclosure by the work product doctrine and Federal Rules of Civil Procedure," court documents note.
In addition to the above, in the latest move, a motion has been filed by the city on Aug 9, requesting Brody to demand audits and audit-related documents associated with Wells Fargo’s FHA compliance relating to underwriting, buying, or selling loans to minority residents of Philadelphia. However, no action has been taken by Brody on the same.
Conclusion
This San Francisco-based banking giant has been embroiled in a slew of scandals, for more than one and a half years now. Troubles have been mounting at Wells Fargo since the revelation of the sales scandal, which was followed by disclosure of issues in its auto-insurance business, online bill-pay services, and the Wealth and Investment Management segment. With the ongoing review process of business practices, more wrongdoings may be reported, consequently straining the top line.
Among other mortgage lenders — Citigroup (C - Free Report) , JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) — have also been sued for discrimination in lending practices. Deutsche Bank AG had also been previously accused by Los Angeles of letting foreclosed homes in low-income regions deteriorate to poor conditions. The case was settled in June 2013.
Wells Fargo’s performance over the past year reflects investors’ disappointment. Shares of this Wall Street biggie have gained 13.5%, underperforming the industry’s rally of 16%.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>