MEMPHIS SUES WELLS FARGO FOR ETHNIC DISCRIMINATION

NY Times - The mayor of Memphis, A C Wharton Jr.. . . and other city and county officials filed a lawsuit accusing one of the nation's largest banks, Wells Fargo, of singling out black homeowners for high-interest subprime mortgages.

The lawsuit, filed in federal court in Tennessee, marshaled a raft of statistics to argue that Wells Fargo offered one lending reality for whites and another for blacks. In Shelby County, which includes Memphis, one of every eight Wells Fargo loans in predominantly black neighborhoods resulted in foreclosure, compared with only one in 59 such loans in white neighborhoods, the lawsuit said.

Such charges, if proven, amount to reverse redlining - marketing expensive loan products specifically to black customers.

"You drive through our neighborhoods and it’s just palpable - you can see a strong emerging black homeowning community that’s gone," Mr. Wharton said in an interview. "The clarity of the patterns just stand out like a sore thumb."

The lawsuit is one of several discrimination suits filed against Wells Fargo in the past two years, as city and state officials argue that the bank must take responsibility for the social and economic effects of a decade of loose - some federal agencies have argued irresponsible -lending practices. In Baltimore, officials say that Wells Fargo's lending practices tipped hundreds of homeowners into foreclosure and cost the city millions of dollars in taxes.

OBAMA'S FORECLOSURE MODIFICATION PROGRAM A BIG BUST

Kevin G, Hall - McClatchy Newspapers - Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.

These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won't get help after all.

How many is hard to tell. Lenders participating in the administration's Home Affordable Modification Program, or HAMP, still don't provide the government with information about who's rejected and why.

To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That's averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.

In the fine print of the form homeowners fill out to apply for Obama's program, which lowers monthly payments for three months while the lender decides whether to provide permanent relief, borrowers must waive important notification rights.

This clause allows banks to reject borrowers without any written notification and move straight to auctioning off their homes without any warning.

DEMOCRATIC HOUSE KILLS BILL TO LET BANKRUPTCY JUDGES MODIFY MORTGAGES

Reuters - In a win for the banking industry, the U.S. House of Representatives voted on Friday to reject a measure that would have allowed bankruptcy judges to change the terms of mortgages for distressed homeowners. Known as "mortgage cramdown," the measure was defeated in a 188-241 decision.

ABOUT A QUARTER OF MODIFIED HOME LOANS STILL FALLING BEHIND

LA Times - About 25% of borrowers helped under the administration's massive foreclosure prevention plan have already fallen behind on their new mortgage payments, according to government data that raise new questions about the program's effectiveness.

The delinquency figures reflect the latest troubles of the program, known as Making Home Affordable. Treasury Department officials this week announced a campaign to put new pressure on lenders to do more to move struggling homeowners into loans with easier terms.

So far, more than 650,000 borrowers have been enrolled into the initial or trial phase of the program and have seen their payments lowered by an average of $640 a month, or 40%. But a recent survey of large mortgage servicers published by the Treasury Department found that more than 25% of borrowers in the program were not current on their trial payments.

Moving homeowners from the trial phase into a permanent modification has become the program's latest stumbling block. Borrowers must make three payments and submit documents proving that they qualify for the program to move forward, but a bottleneck has emerged, with few homeowners making it through. JPMorgan Chase & Co., which signed up more than 178,000 homeowners, noted last month that 22% of borrowers helped didn't make their first payment.

If borrowers struggle to keep up with their modified mortgage payments, housing experts said, it could diminish the effectiveness of the program, which the administration hopes will help as many as 4 million borrowers.