Accumulating wealth is a battle Black families have been fighting for centuries. At the crux of this battle stand inequalities in housing market transactions. Moreover, failure to gain access to reasonably priced, reasonably valued, and reasonably financed real estate is arguably the largest barrier to building wealth. Many scholars would posit that racial segregation is not an issue of relevancy in our modern society. However, it is as strong as ever and tainting the wallets of Black families countrywide. While mounds of legislation have been passed to counter this trend, lawmaking as the sole method of addressing discriminatory practices in the housing market has failed.
Residential segregation dates back as far as the days leading up to World War I. Over the years, Black people have faced zoning ordinances that forbade “colored” persons from moving into homes in predominately white neighborhoods. They have faced racially restrictive covenants that create a legal obligation upon the buyer of real estate to refrain from selling, leasing, or otherwise allowing people of color to occupy the property. They also battled redlining, a system where the FHA once evaluated neighborhoods in which it would financially invest based on its racial makeup.
In the wake of the civil rights movement led by Dr. Martin Luther King, Jr. and other prominent civil rights activists, Congress began to pass landmark legislation intended to cure discrimination. In 1968, President Lyndon B. Johnson signed into law a new Civil Rights Act providing for, among other things, equal housing opportunities regardless of race, creed, or national origin. Title VIII of that Act, more commonly known as the Fair Housing Act, prohibited discrimination concerning the sale, rental, and financing of housing based on race, religion, or national origin. With the passing of this legislation, redlining practices were deemed illegal. Subsequently, Congress passed the Truth in Lending Act, the Equal Credit Opportunity Act, and the Community Reinvestment Act. Still, discriminatory housing practices flourished.
Fast forward to the year 2008, where this Country saw a number of historical events unveil, amongst which were the election of President Barack Obama and the rise of the “Great Recession.” Both events taken together fueled what one great legal scholar has coined as “The Dirty Little Myth.” Soon after Lehman Brothers collapsed, and Congress learned that a $700 billion bailout was necessary to save the U.S. financial system, news commentators began aggressively spreading the message that the failure of the U.S. capital markets could be attributed to minorities who had irresponsibly over-borrowed mortgage loans and defaulted on them. While this allegation is far from accurate, the buzz around it proved to be constructive. It led to the scrutiny of many large U.S. banking institutions and the public exposure of severe predatory lending practices.
At this point, the burning question for many should be how is this even possible? Is racial profiling and discrimination not a thing of the past? Did Congress not put legislation in place to protect minorities from this type of treatment? How is it that banks are getting away with this? Well, it’s simple. Small victories in race relations over the years have left us too complacent to inspect and identify disparate treatment. Despite the hefty legislation to the contrary, blanket laws have outright failed to protect minorities from prejudicial attack.
Despite Congress’ best efforts, private lenders still managed to cultivate strategies to stifle Blacks’ climb towards equality in housing and wealth building. In 2006, 55% of loans to Blacks were subprime, despite the fact that many of those borrowers qualified for prime loans.
Since minorities were over-represented in the subprime mortgage group, they were also over -represented in the foreclosure group. The disparate impact the crash had on Blacks precipitated the filings of a number of claims alleging reverse redlining, discriminatory lending practices, and violations of the mounds of legislation Congress had put in place to prevent these occurrences.
In 2008, the City of Baltimore brought suit pursuant to the Fair Housing Act of 1968 to seek redress for injuries caused by the Company’s reverse redlining practices. Overwhelming evidence of these practices was exposed in affidavits filed by two former Wells Fargo employees. Beth Jacobson, a White loan officer who was employed at Wells for close to a decade, admitted that the Bank saw the Black community as “fertile ground for subprime mortgages” as they wanted so desperately to be homeowners. “We just went right after them.” She explained that the motivation was strictly monetary for her. Jacobson, who at one point was Wells Fargo’s top-grossing loan officer nationally, said she generally made $550,000 to $700,000 annually in commission from selling subprime mortgage loans alone. Other loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. She further explained that “Wells Fargo 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.” Another loan officer stated in an affidavit that he had listened as employees referred to blacks as “mud people” and to subprime lending as “ghetto loans.”
In 2011, the U.S. Department of Justice (“DOJ”) filed suit against Wells Fargo, alleging that the bank discriminated against qualified African-American borrowers in its mortgage lending from 2004 through 2009. In the summer of 2012, the two entered into a settlement agreement in which Wells Fargo agreed to pay $175 million to those affected by its shady practices. The settlement, pending judicial approval, will provide $125 million in compensation for minority borrowers the DOJ said were steered into subprime mortgages. Wells Fargo will pay $50 million more in direct down payment assistance to borrowers in parts of the country where the DOJ identified large numbers of discrimination victims.
This settlement model is broken and ineffective. A mere $175 million rationed out to the 34,000 people affected during the 4-year span when the financial crisis was most prevalent is far from sufficient recompense. There are, at minimum, three additional classes of persons who are also entitled to damages or some form of remedy. The first class comprises those who were steered into subprime mortgages, and ultimately lost their homes in the last decade as a result. The second class comprises those who managed to survive the financial disaster, but are still in their homes and paying higher rates for mortgage loans they were conned into securing. The third class comprises future Black borrowers. There need to be heavier safeguards put in place to ensure that disparate treatment in the lending ceases once and for all.
Single family, suburban homes purchased with federally insured mortgages have been pegged as the largest wealth producing program in American history. Accordingly, gaining fair and reasonable access to housing loans is crucial. In view of that, the initiation of voluntary affirmative action efforts by private mortgage lenders is salient to support Blacks who aspire to build wealth.
While affirmative action programs have historically only been found in education and employment areas, considering it in bank lending may be the innovative solution the industry needs. The most frequently cited objective for affirmative action is to remedy past discrimination. Those who advocate affirmative action say that it is not enough to stop current discrimination. While Wells Fargo is leading the pack in issuing a number of monetary awards to those affected by their discriminatory lending practices, the institution is a long way from complete remediation. The institution, among others, should strongly consider affirmative action programming.
Affirmative action efforts should be led by a task force to identify the needs of the classes of Blacks who have been affected. In using the very same tactics Wells Fargo used to lure thousands of Blacks into financial demise, the bank should actively seek and pursue Blacks who qualify for prime loans and assure that this class of persons receives the same.
To ensure that the bank does not find itself in the same deceitful practices in a decade, an appointment of a Black executive with the responsibility of monitoring the task force is recommended. So long as the executive has no financial stake in the perseverance of unfair lending practices, he should be able to ensure that any and all bias is eliminated.
Also, Wells Fargo’s reckless lending behavior warrants a consideration of criminal sanctions. The bank, its subsidiaries, and its employees, committed fraud, forgery, and identity theft. Crimes of this nature are subject to federal investigation and punishable by prison sentencing. Statements in agreement with this level of justice are floating around the legal community. “I am sorry there will be no perp walk for the top executives so we can see their faces. I know that if someone in my neighborhood robs a bank, they go to jail. But if a bank robs my neighborhood, nobody goes to jail.”
There are a number of reasons to applaud Congress and others who have worked tirelessly for racial equality in our Country. We have made great strides, but there are still areas that need to see major reform. If Blacks are ever to gain a true opportunity to build wealth, the housing market must become more inclusive. Without its participation, notable progress is far from possible. A home can be a family’s most valuable asset, and to most Americans it is. Segregation and disparate treatment can only worsen conditions. So, the future pioneers of the law are charged with the responsibility of ensuring that a lasting change is achieved.
 See generally Melvin L. Oliver & Thomas M. Shapiro, BLACK WEALTH/WHITE WEALTH: A NEW PERSPECTIVE ON RACIAL INEQUALITY (1995).
 See, e.g., Lemann, supra note 3 at 16; Wilkerson, supra note 3 at 181-221.
 Oliver & Shapiro, supra note 1, at 16-18.
 Civil Rights Act, 42 U.S.C.A. § 3601 (1968).
 Title VIII of the Civil Rights Act, 42 U.S.C.A. §§ 3630–31 (1968).
 See Paul Krugman, The Return of the Depression Economics and the Crisis of 2008, at 194 (2009).
 See andré douglas pond cummings, Post Racialism?, 14 J. Gender Race & Just. 611-12 (2011).
 See Daniel Gross, Subprime Suspects: The Right Blames the Credit Crisis on Poor Minority Homeowners–This is Not Merely Offensive, But Entirely Wrong, Slate (Oct. 7, 2008), http://www.slate.com/id/2201641; Letter from Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System, to Robert Menendez, United States Senator for New Jersey (Nov. 25, 2008), available at http:// menendez.senate.gov/pdf/112508ResponsefromBernankeonCRA.pdf; Timeline: A Year of Financial Crisis, NPR (Sept. 5, 2009), http://www.npr.org/templates/story/story.php?storyId=112538025 (detailing the inner-workings of the financial market crisis through a timeline description).
 See Creola Johnson, The Magic of Group Identity: How Predatory Lenders Use Minorities to Target Communities of Color, 17 Geo. J. on Poverty L. & Pol’y 165, 176-82 (2010).
 See Editorial, Mortgages and Minorities, N.Y. Times, Dec. 9, 2008, http://www.nytimes.com/2008/12/09/opinion/09tue1.html.
 Third Amended Complaint for Declaratory and Injunctive Relief and Damages at 2, City of Baltimore v. Wells Fargo, 677 F. Supp. 2d 847 (D. Md. 2010) (No. 1.08-cv-000620JFM), available at http://www.relmanlaw.com/docs/Baltimore-Complaint.pdf.
 See Affidavit of Elizabeth Jacobson at P 12, City of Baltimore, No. 1:08-cv-00062 (D. Md. June 3, 2009), available at http://www.relmanlaw.com/docs/Baltimore-Declarations.pdf.
 Id. at 13.
 Affidavit of Tony Paschal at P 11, City of Baltimore, No. 1:08-cv-00062 (D. Md. June 3, 2009).
 James O’Toole, Wells Fargo In $175M Discriminatory Lending Settlement, CNN.com, July 12, 2011, http://money.cnn.com/2012/07/12/real_estate/wells-fargo-lending-settlement/index.htm.
 Oliver & Shapiro, supra note 1, at 16-18; Freund, supra note 16, at 5.
 Erwin Chemerinsky, Constitutional Law: Principles and Policies, 757 (2011).
 Wells Fargo not only targeted Blacks through their churches, they also hired Black celebrity commentators such as Tavis Smiley to endorse subprime mortgage loans in the Black community.
 See Affidavit of Beth Jacobson, supra note 40.
 See Luis Gutierrez, Gutierrez Statement on $175 Million Wells Fargo/DOJ Home Loan Settlement (July, 12, 2012) (detailing the particulars of the settlement agreement), http://www.gutierrez.house.gov/index.php?option=com_content&view=article&id=768:gutierrez-statement-on-175-million-wells-fargodoj-home-loan-settlement&catid=51:2012-press-releases.