Mortgage Foreclosure & Refinance Resource

First found by mortgagemeltdown, Baltimore Sun reports that to stem foreclosures in Baltimore, Mayor Sheila Dixon’s administration is suing California-based Wells Fargo Bank mortgage provider for what the city says has been a pattern of higher-interest subprime mortgages to blacks more frequently than to whites and that the practice, known as reverse redlining, which violates federal housing law.

If successful, the lawsuit could thrust Baltimore and the Dixon administration into the forefront of the debate over what government can do to address a problem facing cities across the country. The mayor is expected to formally announce the lawsuit this afternoon.

The lawyers involved in Baltimore’s case and several advocates could not name another city that has sued a lender under the federal Fair Housing Act to recover costs incurred from vacant properties.Eric Halperin, director of the Washington office of the Center for Responsible Lending, said Baltimore’s lawsuit is an extension of a long-standing practice in which plaintiffs have used the housing act in attempts to thwart unfair real estate practices.

“The idea of bringing these cases against the lenders is something that is relatively new,” Halperin said. “As long as the city can prove that it was harmed and that the harm was the result of the illegal conduct by the lender, it seems to me that is squarely within the fair housing law.”

Though Baltimore’s lawsuit does not estimate the financial cost of the foreclosure crisis to the city, Solicitor George Nilson, whose department will oversee the suit, said Baltimore has lost tens of millions of dollars - in unrealized property tax revenue, added police and fire protection and legal costs - because of homes abandoned after foreclosure.

“We’ve identified a predatory lending practice that we feel confident we can prove occurred and that we know for a fact is illegal,” said Dixon spokesman Sterling Clifford. “We’re going to hold lending institutions responsible.”

Since 2000, more than 33,000 Baltimore homes have been subjected to foreclosure filings. Wells Fargo, one of the two largest mortgage providers in the city since 2004, made 1,285 loans a year totaling more than $600 million from 2004 through 2006. City officials say most of the company’s loans that resulted in foreclosure were made in black neighborhoods.

In Baltimore, the problem has been particularly acute: The number of “foreclosure events” - such as notices of default and foreclosure sales - increased fivefold from the first quarter to the second quarter of 2007.