RENEE MONTAGNE, host:
You can get a look at the mortgage crisis at the street level by walking around Reservoir Hill in Baltimore. A year ago, you would have to dodge the construction crews bringing the neighborhood back to life. Now city housing Chief Paul Graziano says in parts of Reservoir Hill it's like a set for a movie.
Mr. PAUL GRAZIANO (Baltimore Housing Commissioner): You know, where you walk through and some horrible event occurred and all of a sudden there's nothing here. There's no life. There's just nothingness.
MONTAGNE: On many blocks there are rows of empty houses and for sale signs. That's because the people who bought these houses can't afford to finish or keep them. The leaders of Baltimore are so mad, they're going to try and hold one of those subprime lenders responsible for the mess.
NPR's Libby Lewis reports.
LIBBY LEWIS: What the city's mayor and city council are doing is suing lending giant Wells Fargo, one of the biggest lenders in Baltimore. They say the wave of foreclosures has cost the city millions in lost property taxes and public investment.
They're alleging the company discriminated against black borrowers and helped bring about those foreclosures. This isn't about lenders discriminating by denying credit to borrowers because they're black.
Mayor Sheila Dixon believes what Wells Fargo's been doing in Baltimore is just the opposite.
Mayor SHEILA DIXON (Democrat, Baltimore): You know, years ago we talked about redlining. We talked about it as it relates to targeting certain communities and neighborhoods, geographic areas. Well, now we're talking about reverse redlining.
LEWIS: That is, lenders targeting borrowers for credit on unfair terms because they're black. In its lawsuit filed in federal court, the city alleges Wells Fargo did just that, charging black borrowers higher fees and higher rates than it charged white borrowers.
A city analysis found that 65 percent of Wells Fargo's black borrowers got high-rate loans, compared to 15 percent of white borrowers in 2006. And in Baltimore, Wells Fargo's black customers have filed for foreclosure at a rate nearly four times that of its white borrowers in the city.
John Relman is a fair-housing advocate and lawyer helping represent the city.
Mr. JOHN RELMAN (Lawyer): We're talking about a pattern here of conduct, a pattern with a foreclosure rate that is four times greater in minority community. That doesn't happen unless something is going terribly wrong.
LEWIS: Wells Fargo spokesman Kevin Waetke says the city's charges are not true.
Mr. KEVIN WAETKE (Wells Fargo): Race is not a factor in Wells Fargo's pricing. We do not tolerate illegal discrimination against or unfair treatment of any consumer. Our loan pricing is based on credit risk.
LEWIS: Larry Platt is skeptical about the city's lawsuit, to put it mildly. He's a lawyer who represents other lenders who face similar lawsuits.
Mr. LARRY PLATT (Attorney): They're just throwing mud against the wall to see if it sticks.
LEWIS: He says the only way to tell if a lender is discriminating against borrowers based on race is to dig through every file of every borrower of that lender.
Mr. PLATT: We're finding in some of the cases on which we're working now that there's explanations that are all over the board on why in a particular case a particular borrower received a particular price or a particular type of loan product.
LEWIS: Reasons, he said, that usually boil down the credit risk and that don't have to do with race. Well, says Gary Klein, there's only one way to find out for sure, and that is to let the city of Baltimore see Wells Fargo's files. Klein's a lawyer who's representing minority borrowers in similar lawsuits against lenders, including Wells Fargo.
Mr. GARY KLEIN (Lawyer): We believe that the data will show that after you control for credit risk, that there is still discrimination here.
LEWIS: For now, the question is, will the city of Baltimore get a judge who will allow them to get that far?
Libby Lewis, NPR News.