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Irvington Squares off Against Wells Fargo in Fight Over Foreclosures

The real-estate analysis company RealtyTrac currently lists 540 “pre-foreclosure” homes for sale in Irvington, as well as 128 already foreclosed upon.

At the rally where Smith announced the eminent domain plan, residents held signs reading, “Principal Reduction Now” and “Jail the Bankers.” After the politicians finished speaking, much of their audience marched off to picket a local Wells Fargo branch.

Part of that was the result of national publicity. Last month, the bank paid $869 million to the Federal Housing Finance Agency to resolve claims that it misrepresented mortgage portfolios that it passed off to the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac).

But Irvington officials and residents were more irate over a settlement Wells Fargo reached with the U.S. Department of Justice last year. The bank paid $175 million to resolve claims that its independent brokers charged higher fees and rates to African-American and Latino mortgage customers than they did to whites with the same qualifications for credit.

A Justice Department analysis of the bank’s mortgage loans in 2004-2009 found that in the Chicago area in 2007, for example, the brokers charged an average of $2,937 more to African-Americans and $2,187 more to Latinos.

Those allegations extended to more than 30,000 cases nationwide, while the Justice Department said Wells Fargo steered another 4,000 minority borrowers into risky “subprime” mortgages, at high interest rates, even though they qualified for better terms.

Thomas Perez, the assistant attorney general for the civil rights division, claimed Wells Fargo mortgage brokers imposed a “racial surtax” on minority borrowers.

Crucially, though, Wells Fargo did not admit wrongdoing under the settlement. In a statement, Mike Heid, president of Wells Fargo Home Mortgage, noted the bank was able to avoid litigation with Justice as well as with Baltimore, Illinois, and the Pennsylvania Human Rights Commission, whose claims were included in the deal.

The settlement was “in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight, and to instead devote our resources to continuing to contribute to the country’s housing recovery,” Heid said.

But on Friday, the government told a federal court in New York that a Wells Fargo vice president played “a critical role” in hiding fraudulent home loans. The bank replied that it has not seen any “facts or circumstances” to warrant the action.

Many Irvington residents know Wells Fargo in a legal setting. The San Francisco-based institution is by far the number one foreclosure plaintiff in Essex County.

Wells Fargo is responsible for 18.8 percent of the county’s new foreclosure cases this year, according to statistics from the Administrative Office of the Courts. Second place Deutsche Bank filed 7 percent.

The picture looks even worse for cases that actually end in foreclosures. Of pending sheriff’s sales in Essex County, Wells Fargo is the plaintiff in 31.5 percent. OneWest Bank is next at 11.6 percent.

Real-estate transaction records at the county tax board show most foreclosed properties do not weigh on banks’ bottom line. Individuals and investors, often groups working through the banks, buy most of the sheriff’s sale properties. When a bank does buy the home it foreclosed upon, the turnaround to a third party often happens within days.

Wells Fargo counters that the local foreclosure numbers reflect its gigantic status in the mortgage market, and its willingness to make loans after many lenders retrenched during the Great Recession.

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