A judge has trashed a lawsuit by Cook County that alleged Wells Fargo helped bring about the post-2008 mortgage crisis through discriminatory lending, saying there was no evidence "disproportionately high" minority foreclosure rates were the result of racist loan practices, instead of other causes, such as the mortgage holder's income.
"Too many potentially confounding factors lie between a loan’s origination, on the one hand, and any default and foreclosure, on the other," noted U.S. District Judge Gary Feinerman.
Feinerman issued the decision Dec. 19 in U.S. District Court for the Northern District of Illinois.
In 2014, Cook County sued Wells Fargo and some of its associated entities, claiming Wells Fargo discriminated against minorities when it came to loans. As an alleged example, the county said the bank denied loan modification requests based on race, which caused such loans to default, with foreclosures following. The foreclosures led to the Cook County Sheriff's Office and Cook County Circuit Court system incurring extra expenses in providing foreclosure-related services, according to the county.
Wells Fargo first asked Feinerman to exclude testimony from two expert witnesses, identified as Gary Lacefield and Charles Cowan. These men said there were indications Wells Fargo engaged in discrimination.
Feinerman shut out both witnesses, saying their findings were based on uncertain methodology.
In Lacefield's case, Feinerman said Lacefield "weighed the evidence to conclude that it proves the County's liability case." This was an overreach on Lacefield's part, because expert witnesses "'may not usurp the jury's function to weigh evidence and make credibility determinations,'" Feinerman said, quoting a 2011 Chicago federal court ruling.
Feinerman added: "The analysis did nothing to control for relevant borrower characteristics — such as income, wealth, or credit score — that might explain differential rates of experiencing certain treatment in servicing or in going into foreclosure. Dr. Lacefield thereby failed to compare similarly situated borrowers."
Feinerman pointed out Cowan had the same problem, saying, "There is a disconnect between the data he analyzed and his conclusions regarding Wells Fargo’s allegedly discriminatory conduct."
Wells Fargo also asked Feinerman to throw out the entire suit, which Feinerman found easy to do, given he had barred the expert witnesses.
"And without that evidence [expert testimony], the County has no other evidentiary basis to establish that Wells Fargo engaged in intentionally discriminatory servicing practices that caused minority borrowers to disproportionately suffer default and foreclosure," Feinerman concluded.
Wells Fargo has been defended by attorneys Olivia Kelman, Abram I. Moore, Nicole C. Mueller and Paul F. Hancock, of K & L Gates, of Miami, as well as by Sheldon T. Zenner, Peter G. Wilson and Sarah K. Weber, of the firm of Katten Muchin Rosenman, of Chicago.
Cook County has been represented by attorneys James M. Evangelista, Kristi S. McGregor and Leslie Toran, of Evangelista Worley, of Atlanta; James D. Montgomery Sr., of James D. Montgomery Sr. & Associates, of Chicago; and Roy Shimon, Sanford P. Dumain, Jennifer S. Czeisler, Justin G.Day, Peggy J. Wedgworth and Stephen J. Raab, of Milberg Coleman Bryson Phillips Grossman, of Chicago.
Cook County has also been represented by Alan R. Perry Jr., of Page Perry, of Atlanta, and Kenneth A. Wexler, Mark J. Tamblyn, Melinda J. Morales and Zoran Tasic, of Wexler Boley & Elgersma, of Chicago.
A different federal judge dismissed a similar suit by Cook County against Bank of America in February 2022. In that ruling, U.S. District Judge Elaine Bucklo ruled Cook County failed to show Bank of America undertook a "unified scheme" to unfairly target minorities. Bucklo also prohibited expert testimony in that case on behalf of Cook County from Lacefield and Cowan.
Apart from claims of discrimination, Bucklo noted Cook County "experienced no material increases in its costs as a result of increased foreclosures.” The county had made such claims central to its lawsuits against various lenders over allegedly discriminatory home mortgage lending practices.