There are not a ton of Fair Housing Act cases in the modern era. But they've recently enjoyed a bit of a resurgence. Like this litigation.
You can easily see why the City of Oakland sued Wells Fargo. We've always had a problem with banks "redlining" minority neighborhoods (e.g., refusing to make loans there), and increasingly we have had a problem with "reverse redlining" -- making loans to such neighborhoods, but only at inflated predatory rates. (I think the "reverse redlining" nomenclature is a misnomer; it's actually just a different form of redlining, not the reverse, but whatever.) That's bad too; it results in radically increased foreclosure rates, which are bad for both the borrower as well as the surrounding community (by decreasing the property values of neighboring homes as well as having empty or dilapidated foreclosed homes sitting there).
The statistics are fairly telling:
"Using Wells Fargo’s own data, Oakland employs a number of regression analyses to show that its Black and Latino residents are more likely to receive predatory loans from Wells Fargo . . . . According to these studies, a Black Wells Fargo borrower is 2.403 times more likely to receive a predatory loan than a similarly situated White borrower. A Latino Wells Fargo borrower is 2.520 times more likely to receive such a loan than a similarly situated White borrower. Importantly, the first regression analysis controls for independent variables such as objective characteristics like credit history, loan-to-value ratio, and loan-to-income ratio that might contribute to a borrower receiving a predatory loan. In fact, this discrepancy holds true even for more credit-worthy borrowers—Black and Latino borrowers with FICO scores above 660 are, respectively, 2.261 and 2.366 times more likely to receive predatory loans from Wells Fargo than similarly situated White borrowers. Furthermore, borrowers in minority neighborhoods8 in Oakland are 3.207 times more likely to receive a predatory loan than similarly situated borrowers in non-minority neighborhoods. . . .
A second set of regression analyses using the same data shows that Black and Latino borrowers who receive predatory home loans from Wells Fargo are far more likely to have their homes foreclosed on than White borrowers who receive non-predatory loans. Taking into account a borrower’s race and objective risk characteristics such as credit history, loan-to-value ratio, and loan-to-income ratio, the results demonstrate that predatory home loans—which are disproportionately given to Black and Latino borrowers—are 1.753 times more likely to result in foreclosure. These studies also show that a Black Wells Fargo borrower who receives a predatory home loan is 2.573 times more likely to have their loan foreclosed than a White borrower who receives a non-predatory loan. Similarly, a Latino Wells Fargo borrower who receives a predatory home loan is 3.312 times more likely to have their home foreclosed than a White borrower who receives a non-predatory loan. In fact, 14.1 percent of Wells Fargo home loans issued in Oakland’s minority neighborhoods resulted in foreclosure, as compared to only 3.3 percent of Wells Fargo home loans in non-minority neighborhoods."
The Ninth Circuit agrees with the district court that these statistics and underlying data state a valid Fair Housing Act claim. As a result, the (long-delayed) lawsuit goes forward.
Judge Murguia's opinion is also fairly nice to Wells Fargo and its counsel in a situation in which other judges might perhaps have been more vitriolic. For example, check out this quote on page 40:
"Wells Fargo also attacks the City’s foreclosure regression on multiple fronts, none of which have merit. First, it argues that the regression is invalid because it assumes that a borrower defaults on a predatory loan because of the loan’s high costs and onerous terms, and not because of well-recognized causes of foreclosure like job loss, medical hardships, or divorce. Including these variables in the regression analysis would likely make no difference, however, because they are not correlated with the likelihood that a person will receive a predatory loan, especially because Wells Fargo argues that these life events happen after the borrower receives the predatory loan and before they stop making payments. See Daniel L. Rubinfeld, Reference Guide on Multiple Regression, in Reference Manual on Scientific Evidence 303, 315 (3d ed. 2011) (“Omitting variables that are not correlated with the variable of interest is, in general, less of a concern, because the parameter measures the effect of the variable of interest on the dependent variable is estimated without bias.”). By arguing that these life events explain the discrepancy in foreclosure rates between minority and White borrowers, Wells Fargo implies that minority borrowers are somehow more likely than White borrowers to get divorced, suffer from medical hardships, or lose their jobs. Because this argument has no basis in law or common sense, we conclude that accounting for these life events would not increase the plausibility of the City’s foreclosure regression analysis."
One could perhaps have described this argument in even stronger terms than having "no basis in law or common sense." But Judge Murguia takes the high road.
