Posted Sep 15, 2010 01:27 am CDT
A federal judge has dismissed an unusual “reverse redlining” lawsuit in which Baltimore contends Wells Fargo Bank’s subprime mortgage loans cost the city tax revenue by targeting minority homeowners for high-interest debt that encouraged them to default.
As a result, the city contended, not only these properties but surrounding areas became blighted. The dismissal today by U.S. District Judge J. Frederick Motz says Baltimore didn’t plead a sufficient causal connection between its allegations that homeowners who qualified for prime loans didn’t get them and decreased tax revenue due to foreclosures, reports Bloomberg.
However, he gave the city until mid-October to file a third amended complaint that does show how the California-based bank’s subprime mortages are linked to lost tax revenue.
“Theoretically, the city does have viable claims if it can prove property-specific injuries inflicted upon it at properties that would not have been vacant but for improper loans made by Wells Fargo,” Motz said in his written opinion. “It is in the interest of justice that the city be granted leave to file a third amended complaint.”
Traditional redlining involves a bank’s refusal to make mortgage loans within a geographic area that has a high minority population.
Hat tip: Baltimore Sun.
ABAJournal.com: “Wells Fargo Settles With NAACP, But 2 Cities File New Fair Lending Suits”