City of Miami vs. Wells Fargo and Bank of America

Homlessness, housing discrimination, Housing Policy

Recently, Wells Fargo has undergone intense scrutiny for its questionable sales and employment practices (for more information, check out the New York Times coverage: http://nyti.ms/2e6ZH6l). However, Wells Fargo’s lack of business ethics precedes this recent scandal. This week, the City of Miami is filing suit with the U.S. Supreme Court against Wells Fargo and Bank of America for allegedly practicing racial discrimination against homeowners in mortgage terms and foreclosures during the 2008 housing crisis. The City of Miami asserts that Wells Fargo and Bank of America charged homeowners of color with disproportionately larger fees and unreliable terms for their mortgages. Such exorbitant fees made it difficult for homeowners to keep up with their mortgage payments. (In other words, the mortgages were more expensive than they should have been, which made it more likely that the homeowner would default on the payments.) When homeowners of color wanted to refinance their homes in order to save them, Wells Fargo and Bank of America refused. White homeowners operating under similar economic conditions were able to refinance their homes with these institutions without contestation. Twelve other cities (including Los Angeles, Kansas City, and Philadelphia) have signed on to this suit.

The legal support for this lawsuit comes from the Fair Housing Act of 1968 which was passed with the intention of abolishing housing discrimination. One of the practices that the law specifically addresses (and bans) is discriminatory lending practices.

The lending institutions (and the interest groups that support them) argue that this lawsuit is frivolous because the City of Miami and the other plaintiff cities cannot prove that the discriminatory lending practices led to decreases in property tax revenue (thus affecting the entire city and not just individual borrowers).

The Supreme Court is considering whether or not to take the case.

Here is more information on this lawsuit:

National Public Radio’s coverage of the lawsuit (November 8, 2016):

https://www.npr.org/player/embed/501099505/501121095“>https://www.npr.org/player/embed/501099505/501121095

Los Angeles Times coverage of the lawsuit (November 8, 2016):

http://www.latimes.com/business/la-fi-miami-housing-banks-lawsuit-20161108-story.html

If you are interested in the history of housing policy (and housing discrimination) in the United States, I recommend reading Michele Dickerson’s book Homeownership and America’s Financial Underclass: Flawed Premises, Broken Promises, New Prescriptions (Cambridge University Press, 2014). Dickerson holds the Arthur L. Moller Chair in Bankruptcy Law and Practice and she is a University Distinguished Teaching Professor at the University of Texas at Austin. This book would provide excellent background for anyone who is seeking to understand the underlying causes and the implications of the current lawsuit brought by the City of Miami.

Housing discrimination is one of the many factors affecting homelessness in the United States. (For more information on the specific attributes of the relationship between housing discrimination and homelessness, see the CERD Housing Report: https://www.nlchp.org/CERD_Housing_Report_2014.pdf). If the Supreme Court proceeds, will this lawsuit be able to attain some modicum of justice for the homeowners in Miami (and the other twelve plaintiff cities) who experienced homelessness after foreclosure?

 

 

 

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