Rosemont-based Wintrust is the second bank to be accused of racial discrimination in the mortgage business by Stowell & Friedman. San Francisco-based Wells Fargo, one of the largest mortgage lenders in the US, is a defendant in a class-action suit filed in February, now led by high-profile civil rights lawyer Ben Crump. Chicago-based Stowell & Friedman is co-counsel in that case.
At $50.3 billion in assets and focused on community banking in the Chicago area and southern Wisconsin, Wintrust is in a different league than Wells Fargo, the nation’s fourth-largest bank, with $1.9 trillion in assets. But Wintrust is a substantial mortgage lender all the same, with a national business that originated $6.8 billion in 2021 and $8.0 billion in 2020.
The plaintiff in the suit is Kathleen Bankhead, who for more than two decades was an assistant Cook County state’s attorney and then an independent juvenile ombudsman for the Illinois Department of Juvenile Justice. The complaint alleges that Bankhead in 2020 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 was charging “similarly situated non-African American borrowers.”
The lawsuit alleges Bankhead’s experience was “consistent with Wintrust’s nationwide policies and practices.”
The complaint cites 2020 Home Mortgage Disclosure statistics that it says show Wintrust approved 56% of refinancing applications from Black people in that year while approving nearly 69% of applications from white people.
Black homebuyers approved for loans to finance home purchases received interest rates of 3.31% compared with 3.21% for white homebuyers, according to the complaint.
Wintrust charged Black homebuyers fees equal to 3.3% of their mortgage loan value in that year versus 2.9% for white homebuyers, the complaint stated.
“Wintrust has created artificial, arbitrary, and unnecessary barriers to fair housing opportunities for Black and/or African American borrowers,” the complaint stated. “Wintrust’s policies have discriminatorily extracted an enormous amount of wealth out of Black and/or African American households through higher costs, fees, and interest rates than charged to non-Black, non-African Americans.”
In a statement, Wintrust responded, “While we are unable to discuss the specifics of pending litigation matters, we can say that we believe that this lawsuit is without merit and will vigorously defend ourselves against the allegations in this case. During our more than 30-year history, Wintrust and its employees have taken great pride and care to treat all of our customers equally and respectfully. It is a core value of who we are and how we do business in the numerous communities we serve.”
In an email, Linda Friedman, the lead attorney, said her firm is scrutinizing the home-lending records of other banks.
“Stay tuned,” she wrote.
The process for class-action lawsuits like this one often is lengthy. Plaintiffs will have to surmount a likely motion to dismiss from Wintrust. Assuming the suit survives that, the biggest step in the case will be the judge’s decision on whether to certify the class of would-be plaintiffs. That can be a substantial impediment for many class actions.
Once a class is certified, frequent settlement discussions will begin in earnest.
Friedman has a formidable track record. She is perhaps best known for winning big-money settlements on behalf of employees of Wall Street firms like Merrill Lynch and Smith Barney. Perhaps the best known of those was the $150 million settlement for female employees of Smith Barney in the well-remembered case detailing the sordid “boom-boom room.”
In Chicago, she successfully challenged the Fire Department’s promotional exam as a form of discrimination (in this case, against white firefighters) and won $6 million in damages, as well as tens of millions more in reversals of denied promotions and pension benefits.
Much of the firm’s work has focused on workplace discrimination—based on age, race or gender.
Friedman says the suits alleging lending discrimination are a logical progression.
“We have handled many class actions for Black advisors in the banks and mortgage loan officers,” she says. “The claims often involve steering Black advisors or mortgage loan officers by zip code to neighborhoods that census data shows are not white. The data showing that customers face discrimination too is a deeper dive or an extension of the same work.”
Faced with statistics on disparate home lending patterns like the ones set forth in the Wintrust lawsuit, bankers generally will respond that they originate loans they can sell to the secondary market—primarily federally chartered Fannie Mae and Freddie Mac. If potential loans don’t conform to Fannie and Freddie’s specifications, bankers say, they don’t make them—or make them on terms acceptable to the secondary market.
The exception typically are larger-dollar mortgages for high-priced homes, which are called “non-conforming.” Those are held on banks’ balance sheets or sold off as parts of securities to private investors.
Comments are closed.