Wintrust charged in racial discrimination lawsuit in home lending

Rosemont-based Wintrust is the second bank to be accused of racial discrimination in the mortgage industry by Stowell & Friedman. San Francisco-based Wells Fargo, one of the largest mortgage lenders in the United States, is a defendant in a class action lawsuit filed in February, now led by top civil rights lawyer Ben Crump. Chicago-based Stowell & Friedman is co-attorney in this case.

With $50.3 billion in assets and focused on community banking in the Chicago area and southern Wisconsin, Wintrust is in a different league from Wells Fargo, the nation’s fourth-largest bank, with $1.9 trillion. dollars of assets. But Wintrust is still a major mortgage lender, with a national business that generated $6.8 billion in 2021 and $8.0 billion in 2020.

The plaintiff in the lawsuit is Kathleen Bankhead, who for more than two decades served as an assistant state attorney for Cook County and then an independent juvenile mediator for the Illinois Department of Juvenile Justice. The complaint alleges that in 2020, Bankhead paid Wintrust higher rates and fees for a mortgage financing the purchase of a home in a “majority-minority” neighborhood in Chicago than what Wintrust charged “borrowers non-African Americans in the same situation”.

The lawsuit alleges that Bankhead’s experiment was “consistent with Wintrust’s national policies and practices.”

The complaint cites 2020 residential mortgage disclosure statistics, which it says show Wintrust approved 56% of black refinance applications that year, while approving nearly 69% of white applications.

Black buyers approved for loans to finance a home purchase received interest rates of 3.31% compared to 3.21% for white buyers, according to the complaint.

Wintrust charged black buyers a fee equal to 3.3% of the value of their mortgage that year compared to 2.9% for white buyers, the complaint says.

“Wintrust has created artificial, arbitrary and unnecessary barriers to fair housing opportunities for Black and/or African American borrowers,” the complaint states. “Wintrust’s policies have discriminatoryly extracted an enormous amount of wealth from Black and/or African American households through higher costs, fees and interest rates than those charged to non-Black and non-African Americans. Americans.”

In a statement, Wintrust responded, “While we are unable to discuss the details of any pending litigation, we can say that we believe this lawsuit is without merit and we will vigorously defend ourselves against the allegations in this matter. During our more than 30 year history, Wintrust and its employees have taken great pride and care in treating all of our customers equally and respectfully. It is a core value of who we are and how we do business in the many communities we serve.

In an email, Linda Friedman, the lead attorney, said her firm was reviewing home loan records from other banks.

“Stay tuned,” she wrote.

The class action process like this is often lengthy. Plaintiffs will have to overcome a likely motion to dismiss from Wintrust. Assuming the prosecution survives this, the biggest step in the case will be the judge’s decision whether or not to certify the potential plaintiff class. This can be a significant hurdle for many class actions.

Once a class is certified, settlement discussions often begin in earnest.

Friedman has a tremendous track record. She is perhaps best known for winning major settlements on behalf of employees of Wall Street firms like Merrill Lynch and Smith Barney. Perhaps the best known of these was the $150 million settlement for female Smith Barney employees in the well-known case detailing the sordid “boom-boom room.”

In Chicago, she successfully challenged the fire department promotion exam as a form of discrimination (in this case, against the white firefighters) and won $6 million in damages, plus tens of millions more in rescinding of denied promotions and retirement benefits.

Much of the company’s work has focused on workplace discrimination, based on age, race or gender.

Friedman says lawsuits alleging loan discrimination are a logical progression.

“We have handled many class action lawsuits for black advisors in banks and mortgage officers,” she says. “Complaints often involve directing black counselors or mortgage loan officers by zip code to neighborhoods that census data shows are not white. Data showing that customers are also being discriminated against is a deeper dive or extension of the same job. »

Faced with statistics on disparate home loan models like those exposed in the Wintrust lawsuit, bankers will typically respond that they issue loans they can sell in the secondary market — primarily Fannie Mae and federally chartered Freddie Mac. If potential loans do not meet Fannie and Freddie’s specifications, say the bankers they don’t manufacture them — or manufacture them on acceptable terms for the secondary market.

The exception is generally larger mortgages for high-priced homes, which are called “non-conforming”. These are held on banks’ balance sheets or sold as part of securities to private investors.

Isabel M. Bourgeois