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Mobtown Beat

Paying It Forward

Amount paid in “reverse redlining” settlement remains a mystery

Baltimore Mayor Stephanie Rawlings-Blake recently announced a down-payment assistance program for future city homebuyers. It is funded with $4.5 million from last July’s settlement with Wells Fargo over alleged “reverse redlining” practices. That’s a little less than twice the amount the city paid a D.C.-based law firm for its work on the case.

How much the bank’s actual victims got is still a mystery.

Unveiled on Jan. 7, the new program, called CityLIFT, is billed as a nationwide partnership with the bank, which last July settled numerous lawsuits brought in several jurisdictions and by the U.S. Justice Department for a reported $175 million. Qualified buyers will be eligible for up to $15,000 in down-payment assistance, according to the press release.

“This collaboration with Wells Fargo and local nonprofits will help Baltimore residents achieve the American dream of homeownership by offering financial support, as well as the resources to help them make successful investment decisions,” Rawlings-Blake said in the release. “The CityLIFT Program supports ongoing efforts like Vacants to Value by creating new opportunities for families to live in great neighborhoods.”

The original complaint was all about compensating the victims of Wells Fargo’s predatory loan practices which, according to former loan officer Beth Jacobson, amounted to a systematic targeting of minorities for high-cost loans. Jacobson says she was paid more for making high-interest loans, and that this was the bank’s policy. Baltimore City claimed it spent tens of millions of dollars cleaning up after Wells Fargo foreclosures and submitted affidavits from neighboring homeowners as evidence of the bank’s malfeasance. When City Paper examined the properties highlighted in those first eight affidavits, it found two cases of suspected mortgage fraud (“The Victim Who Wasn’t There,” Mobtown Beat, July 15, 2009). The bank never admitted wrongdoing.

Along with the $4.5 million the city got as part of a “lending assistance program” for new homebuyers in the city—the money now dedicated to CityLIFT—Baltimore received $3 million for “local priority housing and foreclosure-related initiatives” (“Bank Payback,” Mobtown Beat, July 18, 2012). At the press conference announcing the settlement last July, City Solicitor George Nilson said that $3 million was to be spent “at our discretion” and would include fees owed to Relman, Dane, and Colfax, the law firm Baltimore hired to pursue the litigation.

Relman asked for around $3 million, Nilson confirmed last week. “From late summer to fall, we went back and forth . . . and eventually arrived at the figure of $2.4 million.” Nilson says only $2 million of the settlement money went to pay Relman; the rest came from general funds.

That leaves $1 million for foreclosure mitigation, which will be distributed to favored nonprofit corporations in the coming months. “They have been asked to submit and have submitted proposals,” Nilson says of the nonprofits.

Nilson says he went to the mat in negotiations with Wells Fargo to get money to pay Relman. “I told them: There will be no settlement if you’re going to try to freeze out my lawyers,” he says. “I do not believe in hiring lawyers to do hard work on our behalf and then tell them at the end of the day, ‘I can’t pay you, or the other side won’t let us pay you.’”

Baltimore is a plaintiff in two other complex, high-profile lawsuits involving financial services: one suing banks over manipulation of the London interbank offered rate, the other targeting alleged bid-rigging in the municipal bond market.

Relman’s compensation from the Baltimore litigation against Wells Fargo amounts to about 1.6 percent of the $150 million Peter Angelos took in the settlement with cigarette makers. Angelos had originally asked for $1 billion.

When the Wells Fargo case settled, more money was claimed to be forthcoming from the enormous bank in the form of good loans for people in the areas hit hardest by the 2008 real-estate crash. The bank agreed to lend $425,000,000 in Baltimore City in next five years, $125,000,000 of which will be in “disadvantaged areas,” Nilson says. It is unclear how much Wells Fargo lends to city residents as a matter of routine. On the national level, $50 million of the $175 million in direct cash compensation was to go toward down-payment assistance for new borrowers, while $125 million was to repay an estimated 34,000 people in eight cities who qualified for normal loans but were steered into high-interest rip-off loans.

“This is a case about real people, African-American and Latino, who suffered real harm,” U.S. Assistant Attorney General for the Civil Rights Division Thomas Perez told a City Hall press conference last July. He cited the case of an 80-year-old African-American woman with the admirable credit score of 714, who, he said, received a high-interest adjustable-rate loan instead of the low-interest fixed-rate loan she qualified for.

The woman was not present nor identified.

But who these victims are, where they live, and how much they’ve gotten so far is hard to pin down, six months after the settlement announcement. Calls to the Justice Department brought Dena Iverson to the phone. “We’re still in the process of contacting people,” she said on Jan. 9, promising to email relevant sections of the agreement. Several follow-up calls brought an apology for failure to send the information and a promise to do so. At press time the information had still not arrived.

Iverson laughed when she was asked to identify the recipients of the payout. “I can’t tell you that!” she said.

“I would love to know how much was allocated to Baltimore,” Nilson says, estimating the amount to be a minimum of $15 million. Unlike the other seven cities, Baltimore’s compensation is supposed to go only to city residents, not metro regions, he says.

“The case, as I’m sure you’ll recall, was originally brought by the city as a damaged or harmed entity. And that was the great challenge,” Nilson says. “We were looking to put money in city coffers but said pretty regularly [in court] that our intention was not to sweeten the general fund, our intent was to provide relief to appropriate borrowers.”

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