Wells Fargo Repeatedly Called to Account for Racial Inequities in its Sub-Prime Loan Practices (4/28/08)
FOR IMMEDIATE RELEASE: April 28, 2008
CONTACT: Julie Goodridge, CEO
NorthStar Asset Management, Inc.
PO Box 301840, Boston, MA 02130
On April 29th, NorthStar Asset Management, Inc. and Responsible Wealth, a project of United for a Fair Economy, both based in Boston, Massachusetts, will once again ask the Board and shareholders of Wells Fargo to examine the company’s sub-prime lending practices. “As shareholders, we have believed that sub-prime, predatory lending practices bump up corporate profits in the short term, but are driven by shortsighted, extraordinary greed on the part of financial institutions like Wells Fargo,” said Julie Goodridge, CEO of NorthStar Asset Management.
For the past five years, NorthStar and Responsible Wealth have asked Wells Fargo to explain its predatory lending practices. “Initially we asked Wells Fargo to tie executive compensation to putting an end to sub-prime and predatory mortgage practices; at that time we had seen Wells Fargo’s sub prime mortgage originations grow from $230 million in 1997 to $16.5 billion,” said Ms. Goodridge. “We were concerned about the impact that these mortgages would have on low and moderate income families and the reputation of Wells Fargo.”
In 2006, NorthStar and Responsible Wealth crafted a new resolution asking for Wells Fargo to account for racial inequities in their sub prime lending practices. 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.”
According to Federal Reserve data, 53.7% of purchase loans to African-American families were “high-cost” versus 17.7% to white borrowers. According to data reported by Wells Fargo as required by the Home Mortgage Disclosure Act (HDMA), African-Americans were 3.69 times, and Latinos were 1.82 times more likely than whites to receive a high cost loan in 2006. A lawsuit filed by the City of Baltimore this year finds 65% of Wells Fargo’s African-American borrowers in that city received high-cost loans.
For the mortgage industry as a whole, racial bias in high-cost loans has been rampant. A report from United for a Fair Economy, in January 2008, detailed racial disparities in expected losses from foreclosure of sub-prime loans made during the past eight years. “Using the American dream of home ownership to boost profits at the expense of the citizens of this country, is obviously egregious and is the cause of the current financial collapse of this country,” said Goodridge.
According to data released by Wells Fargo in mid-March, Chairman Richard Kovacevich received a compensation package of $18.5 million, while profits at the company dipped 4% and the bank had its first earnings decrease since 2001. Goodridge will once again present NorthStar’s sub-prime resolution tomorrow along with members of Responsible Wealth in hopes that officers at the company will finally wake up. “Wells Fargo has been exemplary in many ways, but management jumped on the sub-prime band wagon and our company’s profits will continue to suffer. We wish the Board had had the foresight to support our initial resolution in 2004; perhaps some of the damage could have been avoided,” Goodridge stated.
NorthStar Asset Management, Inc. based in Boston, is a wealth management company focused exclusively on socially responsible investing. 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 using their influence to advocate for widespread prosperity.
The full text of the resolution is available online here.
NorthStar Asset Management, Inc. is a wealth management firm based in Boston, specializing in socially responsible investing.