Wells Fargo Asked to Account for Racial Inequities in Sub-Prime Loans

At Wells Fargo & Company’s annual meeting on April 24 in San Francisco, members of Responsible Wealth, a national network of businesspeople, investors, and affluent Americans, are presenting a shareholder resolution requesting that the company explain racial and ethnic disparities in its sub-prime loans.

“Buying a home has been the key to joining the middle class in this country, but it’s being stolen from many by lenders who prey on vulnerable low-income, minority and elderly borrowers,” said Julie Goodridge, a member of Responsible Wealth and owner of Northstar Asset Management, Inc. of Boston, which filed the resolution on behalf of Responsible Wealth. “These high-interest loans can be devastating to individuals and families. Wells Fargo must explain why so many of its mortgages to people of color are high-cost, sub-prime loans.”

Wells Fargo’s Home Mortgage Disclosure Act (HMDA) report for 2005 shows that high-cost loans make up 14.8% of its conventional first-lien mortgage loans to African-Americans and 5.5% of loans to Latinos, compared to only 2.8% of loans to whites. The 2005 HMDA data is based on more restrictive new criteria for defining high-cost loans, resulting in lower raw percentages than in previous years. However, the new data indicate that African-Americans are now over five times more likelytwice as likely as whites to receive high-cost loans (up from 1.7 times in 2004). than whites to receive high-cost loans (up from 3.9 times in 2004), while Latinos are now

Currently, foreclosures nationwide are at alarming levels, many sub-prime lenders are filing for bankruptcy, and almost 14 percent of all sub-prime loans are in delinquency.

Responsible Wealth has been challenging Wells Fargo’s predatory practices for four years. As a result, the company has changed certain lending policies, such as reducing prepayment penalties and eliminating mandatory arbitration.

The resolution, filed by Northstar Asset Management on behalf of Responsible Wealth, asks the company to prepare a report explaining the racial and ethnic disparities in the delivery of its high-cost, sub-prime loans. The resolution also asks the company to consider whether “the company’s racial and ethnic disparities in high-cost loans affect the home affordability or wealth-building benefits of homeownership for its minority customers.”

The full text of the resolution is online at:
http://www.responsiblewealth.org/shareholder/2007/SRES2007_Wells_Fargo_race.html

Responsible Wealth, a project of United for a Fair Economy, is a national network of businesspeople, investors and affluent Americans who are concerned about deepening economic inequality and are working for widespread prosperity.

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