I know it sounds bad, but that’s only because it might actually be that bad. Beth Jacobson, a former loan officer at Wells Fargo, sat down with the Times this weekend to get into the nitty gritty of her craft. Generally speaking, Jacobson described her work as ten years of riding “stagecoach from hell…systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages.” Okay, but specifically, how did she and her colleagues do it? I’m glad you asked.
“We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”
Interesting! Sort of fucked up, sure, but before we start name-calling, let’s hear more about the process.
In 2001, former loan officer Tony Paschal states in his affidavit, Wells Fargo created a unit in the mid-Atlantic region to push expensive refinancing loans on black customers, particularly those living in Baltimore, southeast Washington and Prince George’s County, Md.
“They referred to subprime loans made in minority communities as ghetto loans and minority customers as ‘those people have bad credit’, ‘those people don’t pay their bills’ and ‘mud people,’ ” Mr. Paschal said in his affidavit.
He said a bank office in Silver Spring, Md., had an “affinity group marketing” section, which hired blacks to call on African-American churches. “The company put ‘bounties’ on minority borrowers,” Mr. Paschal said. “By this I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities.”
Emphasis ours, but only because we wanted to make it easier for Wells to respond to the allegations. Here’s the statement offered to the Times:
“We have worked extremely hard to make homeownership possible for more African-American borrowers,” wrote Kevin Waetke, a spokesman for Wells Fargo Home Mortgage. “We absolutely do not tolerate team members treating our customers or others disrespectfully or unfairly, or who violate our ethics and lending practices.”
Rode, not road.
who gives a shit?
BofA did the same thing with the border states. The Matricula Consular card was all you needed for banking and a home loan.
-Boones before noons
@2- people who aren’t scum, unlike yourself.
I smell an indictment coming.
@2- don’t you have a white sheet to be poking eye holes in?
Aside from the repulsive racist overtones, remember:
You have bad credit, look in the god damn mirror. Pay your fucking bills on time and you won’t have to deal with shitbag brokers and pay 30% on your credit cars.
It’s hard to believe that anyone other than some Idaho Aryan Survivalist has ever used the term, mud people. However, it is in bold so it must be true.
@7- are you going to offer the same bit of wisdom to the mentally challenged groups targeted by WFC? You have no one to blame but yourselves, etc?
@8- as stated above, if you can read, DB bolded that. are you suggesting Jacobsen is making this up?
Mud people might be a little strong but otherwise I call this “knowing your customer”.
Liquor stores, pay day loans, and bail bonds shops are located where they are for a reason. That video of MW and Corrine Brown is demonstrable of said reason.
And don’t give me some socio-economic BS about those stores causing the problem. Take those lies to abovethelaw.
@gherkin– would you advocate they pushed loans on the mentally challenged, too? By your logic it seems like it’d be a no-brainer.
“Mud people might be a little strong”
so people who think a reference to the possibuility of a “wise Latina” judge is “racist” have no reaction to “mud people” other than it might be a little strong?
@12…no because they are not allowed to sign valid contracts. But just general idiots, then yes.
And remember, you don’t call actual retarded people retards, it’s poor taste. You call your friends retards when they’re acting retarded.
@7 …….”cards” not “car”.
@ Merkin
You’ve just given me a brilliant idea:
With white collar layoffs, there’s plenty of opportunity for serious profit opening payday loan and similar outfits in previously middle/upper middle class neighborhoods.
Now, who wants to lend me some easy money to get this thing going?
Now if I could only get a deal to open a payday loan/pawn/liquor store inside a McDonalds
Boom! Pay Me!
After reading this post, I will not do any business with Wells Fargo. “Mud People” is way over the line.
White Guy
In all fairness, employees at all companies hate or disdain their customers, but yes, this looks pretty bad.
@anal_yst – you missed the opportunity here – no need to set up shop that will likely fail when the eco recovers. @merkin has just written my new business plan:
investorcluzo’s liquor and loan shop! we’ll cash the weekly and *sell* you a *debit* card so that you can visit our liquor store to load up on bevs for the bbq on saturday afternoon. what the hell, might as well have a bail bondsman on premises too – because, who wouldn’t want a drink after being in lock-up?
thanks merk!
King & Spalding Socked with $90k Discovery Sanction
This is one of those “think before you leap” lessons. Lawyer A says Lawyer B had obstructed discovery and misrepresented facts to the court. Judge says he’s going to figure out who’s telling the truth. He did so. Essentially, the court lambasted K&S’s counsel for accusing Duane Morris’s counsel of being uncooperative in discovery. The order in the patent infringement suit of CBT Flint Partners v. Return Path, No. 1:07-CV-1822 (N.D. Ga. Aug. 2008) is here:
http://www.dailyreportonline.com/Editorial/PDF/PDF%20Archive/Cisco-order2-081908.pdf
and the an article about it, is here:
http://www.law.com/jsp/article.jsp?id=1202423885428
Why would anyone in their right mind hire King and Spalding ?
Everyone knows what they did, and now the info is surfacing. The assholes should bleed because of it. Its only fair.
That shit aint funny cluzo.
The ugly side of regulators focusing on Bank Secrecy and CRA compliance over the last several years rather than the unbelievable rise in concentration in construction / land development loans.
You force someone to be “CRA compliant”, and to lend in areas where, historically, people haven’t exhibited the credit characteristics previously required to own homes, and you get (a) bad loans (shocking) and (b) over-incentivized producers of bad loans.
Not an apology, and fuck you in advance to those of you who will call me racist.
I’m just saying – if you come up with a government program to make mortgages to 4 year-olds because it is politically expedient for some reason to say that you need to increase 4 year-old home ownership, and then in your reviews you punish banks and their lenders who “aren’t doing enough to encourage” home ownership among 4 year-olds, you are going to encourage people within those organizations to take a “whatever it takes” attitude for the new Baby Loans.
Signs of the same in the new “banks aren’t lending enough” talk and discussion of disclosure of every dollar of TARP usage. If you force banks “go make loans” – they’re going to. Credit quality will suffer. AGAIN.
You can have it done right, quickly, or cheaply. Pick any two. The government usually goes with quick, followed (occasionally) by cheaply, almost never with right.
Wait a minute!!! Are you saying people shouldn’t be allowed to talk you into something for money that might come back and haunt you later?
~Former Feeder Fund Sweetie w/ Lower Back Tattoo That She Hates Now That She’s Sober.
@23 – it’s not funny, it’s ironic. having grown up in a “predominantly” black church (we had two white congregants) in the south, I can concur that pastors do have sway over their congregations – so I get the game. it’s quite alarming that there are far more liquor stores in minority neighborhoods than banks. americans have always exploited the poor – think about the highest margin businesses: debt collection, credit clean up, payday loans, pawn shops. preying on the weak is darwin’s theory 101…
if you don’t read the fine print when making the largest purchase of your lifetime, then perhaps you deserve what you get. explain to me why people do more research when buying a computer (that will be obsolete in 3 years) than they do when buying a home?
@25 – the tramp stamp! don’t they have cream to get that removed now?
The name calling is offensive but people go where the customers are. It’s all about money. I don’t think they picked black churches because they wanted to hurt blacks, they picked black churches because there was a decent concentration of likely customers. If they could find concentrations of whites who would sign up for expensive loans, they would and did go there too. “It’s not personal Sonny, it’s strictly business”.
Free pigs feet and chitlins for every variable rate loan!
@ cluzo
That’s a good question. Perhaps because you’re sold a home, but you buy a computer?
29 A mortgage broker I know tells me that the only question people used to ask was what will the monthly payment be if I borrow $X. In the old days of 15 and 30 year fixed the answer was simple and understandable. When mortgages got more exotic, the answer became complex and tripped up a lot of people. In some cases because the details were obscured, in others because people didn’t want to look for them. But you all know that. And I don’t feel like arguing about who’s to blame.
Mud people sound scary.
No retail customer reads the small print on loan/mortgage docs. They are adhesive contracts. Take it or leave it.
what ever happened to buying a home because (a) it was in a neighborhood you wanted to live in, (b) you liked the actual structure, and (c) you believe you could live there for the next [x] years? I believe people went off the reservation thinking they could all be little donald trumps when credit got cheap. didn’t they know he’s been through chapter 11 a few times?
@28 – I would note that daniel bolud will be serving up tripe at his new restaurant in manhattan. so much for your stereotypes…
Its not clear what the black churches got in return for giving their stamp of approval to Wells. Was it a donation? Or possibly a member worked at Wells. Sounds like a twist on the Madoff approach. Who better to trust and work with than the person who’s most like you? – a fellow black, Jew, whatever.
@34 – I don’t know if there were kickback deals or donations offered. but I do know that if you were a member of the church and told the pastor that you had a “great” deal – and who wouldn’t want to put one of their congregants in a nice home – you could get some air time. so yes, sounds like a “confidence” game a la madoff. and let’s face it, it was wells fargo – not some fly by night internet bank…
If you are pushing subprime mortgages why on earth would you target people who qualify for a conforming loan? Seems to me they were targeting their correct market (assuming that group did have less than stellar credit).
The racist labels they used were way out of line but what they did is no different than any other business. You push your product to the demographics that fit it.
I guess mobile home salesmen should be targeted next for taking advantage of all the honkies in Oklahoma.
blacks (like any self-interested party) will always want their credit grades to match the “status quo” (read: whites).
banks invented subprime when politicians declared, “let this be so.”
now we have government-insured FHA debt pools. that they grade as SLIGHTLY LESS TOXIC than subprime paper has caused every “white knight” to forget: they target the same underprivileged minorities that don’t pay their bills, abuse equity levels to live outside their means, and experience job turnover most frequently.
WOW, GOOD THING THOSE LOANS ARE INSURED BY OUR GOVERNMENT DOLLAR FOR DOLLAR. wouldn’t want to have to subscribe to any nutjob hyperinflation theories! besides, i trust the credit rating agencies to grade them properly.
Being black and educated I feel I can respond to this looking at both angles.
1. Business is business, Wells Fargo did what they had to do to make money.
2. However, the racist comments are definitely over the line and should not be tolerated.
The solution to the problem is for the ‘fine-print’ to be explained to the barrowers.
With that said, you have to draw the line somewhere. If you are making 35K – 40K common sense should tell you that you can’t afford a 500K+ house. If you can’t come to that realization you are retarded.
@10 – I think you mean Paschal.
And the answer to your question is: Of course not! Who could ever imagine a former, possibly-disgruntled employee making something up?
When people do this with their money:
http://www.kanyeuniversecity.com/blog/?em3106=234231_-1__0_~0_-1_6_2009_0_0&em3298=&em3282=&em3281=&em3161=
They scream target/mark….
Amazing but not surprising– the wfc guys were ‘ripping their clients face off’ not the first time someone on wall street preyed on the unsuspecting. Read the book “FIASCO”- it’s deplorable that these guys went to churches to find their prey.
But even so, there’s plenty blame to go around. Wells shouldn’t be snake oil, but buyers must not agree to buy the Brooklyn bridge (unless a reputable bank like gs is selling LOL). I go to a black church and remember hearing these sales pitches during service. It was a hard sell.
It’s good to see that people are coming to realize there’s a lot of culpability to go around– in march 2007, people claimed the subprime crisis was caused by unscrupulous minorities that committed mortgage fraud. While there was some of that to be sure, I’m glad the other drivers are starting to emerge- hard sell to the mud people etc.
I hope that these racist pigs get what is coming to them. I can’t believe that my Aunt’s employer was bought up by these scumbags.
@41 nice call on FIASCO
Written in 1999, seems like he could be talking about today… See the editorial review here
Http://www.amazon.com/Fiasco-Inside-Story-Street-Trader/dp/0140278796
Interesting…because Urban Dictionary says that mud people are actually mexicans… (http://www.urbandictionary.com/define.php?term=mud+people)
BFD. Isn’t this part of the wonderful world of “niche marketing” we always hear about? Would these tactics be equally bad if they were balanced by sending competing teams of Caucasian bankers to target megachurches in Whitetrashistan flyover states?
The government’s concept of spreading homeownership was noble, but the execution on the part of lenders was deplorable.
The big problem with Wells, as indicated in the article, was putting people who qualified for prime loans into subprime loans by manipulation of data.
But that goes along with the attitude that blacks as a group are one big stereotype, used for fun or financial gain.
(I was thinking about that when watching the hilarious “The Hangover” where all the black characters are incompetent, criminals, or hugely stereotypical. That sort of thing is popping up in a lot of movies of late).
But you cannot blame Wells for legitimate marketing methods, and targeting the church makes a lot of sense.
In some ways people are contradictory. They want more loans to blacks (at any cost usually), and yet, when that’s done and ends in grief, then it is somehow racism all over again. Like most things, there is blame to around.
@44 and, of course, the urban dictionary is unquestionably the definitive source on these matters.
@Finnegan
How was the Gov’t plan to spread home ownedership noble?
Simple fact, its a rent vs. own decision, not everyone should own (or be pwnd).
let’s be clear, the subprime problem was not caused by blacks getting nefarious loans. they make up a small percentage of the total sub-prime pie. the issue at hand is the (malicious) intent of the bank(s) to target *unwitting* (gullible/naive) consumers. discuss…
@finn – stereotyping is back in vogue now that we have multi-racial president. the white guilt has been satiated. back to the “good ‘ole days” in 5, 4, 3…
@49
Exactly. The predatory lending issue was there at the beginning, but the biggest problem is that the Fed under Greenspan couldn’t be bothered when it was turning into the subprime feeding frenzy.
http://www.nytimes.com/2007/12/18/business/18subprime.html?_r=1&oref=slogin
@49 probably much more a class than race issue- in CA, for instance, banks preyed on Hispanics and Asians. But what’s your point? Predatory practices are bad, whether due to race or class.
Not sure it’s the decrease in white guilt that leads to increased stereotyping either- some of our black folk do a good job in the rap videos reinforcing and perpetuating stereotypes for bling…if lil Wayne and 50 do/say it, why cant their fans … Who happen to be mostly white. mos def and taalib dont play into stereotypes, wonder why their albums don’t sell (yes yes I know- because there are few buyers)
#12 & #14. Excellent ideas. I’ll draw-up a business plan to sell sub-prime, government guaranteed loans at UCP and ARC centers nationwide. When the loans default I’ll have Uncle Sam pay the bill. Oh wait, the banks and car manufacturers have already done that. Nevermind.
@51
Too true. Don’t want to give the impression that blacks are guiltless in perpetuating stereotypes as well.
@49
Yea, I agree with that to some degree, (the Obama guilt-free pass) though I think the trend started a bit earlier. I particularly liked how all the dark skinned people in “300″ were pompous, effete, or non-fighters, and quite easily dispatched. Or how in the excellent last Batman flick, all the ethnics either got killed, were corrupt, were full of pompous talk, and again, easily dispatched.
@48
A government idea to spread ownership is good to the extent that owning homes makes for more stable neighborhoods and pride of place, and it’s what most people ultimately aim for. Kind of a generic good, like having a job, or owning a car.
I am not suggesting it is good for everyone. I am also not suggesting that the government impose lending requirements that ignore business good judgement.
The government did NOT in fact do that, but business ran with the idea, abandoning good judgement for easy profits, securitization offering seeming security against shoddy lending.
@Finn
You’re confusing correlation of home ownership and associated positive externatlities with causality. The idea of increasing ownership was idiotic because it did not account for the execution of the idea. It was extremely idiotic because it tried to manipulate the market. Guess who always wins? In fact, it was created to gather more votes if anything.
Did they mean Mudd people?
@2 halarious
Wells Fargo can spin the facts to put the onus back on the loan officer … but anyone who has worked in the subprime space in lending knows that these products were pushed into inner city neighborhoods to maximize production, profitability and the subprime division’s profitability. There were no secrets held from upper level management about this. They all profited. As long as the “loan application” was manipulated to meet the secondary investor’s guidelines the loan was made. It is time that those who promoted “subprime” business be held accountable such as Mozillo and the rest of the “conspirators”.