Ex-loan officer claims Wells Fargo targeted black communities for shoddy loans

The mortgages were so popular that they spawned a boom in lending that in turn fueled the country’s economic growth. Home­ownership soared among blacks and Latinos, a fact celebrated at the time by banks and consumer advocates.

Jacobson said her job in Wells Fargo’s subprime unit was straightforward: Get people approved.

Graphic

The rise and fall of subprime loans and foreclosures.

She had never worked in lending but quickly learned the ropes. In her affidavit, she said the quickest and most profitable way to make loans was to steer borrowers into the new breed of subprime mortgages. It didn’t matter if they couldn’t afford the mortgage in the long run. All loan officers were paid by the number of loans they approved, not whether they succeeded, she said.

Subprime loans were so lucrative, she testified, that many of her counterparts selling traditional mortgages realized they could make more money by referring borrowers to her than by making their own loans. That meant customers were offered subprime mortgages even if they qualified for better interest rates, she said. Other times, brokers encouraged buyers not to provide a down payment or income documents, automatically funneling them into the more profitable subprime division, she said.

“There was always a big financial incentive to make a subprime loan wherever one could,” Jacobson wrote in her affidavit.

Company spokesman Oscar Suris flatly denied Jacobson’s testimony. He said the bank never made “no doc” mortgages or predatory loans that kept homeowners from paying down principal. An internal review of a sample of the subprime mortgages Jacobson approved found that almost all of the borrowers would not have qualified for traditional loans. And, he said, prime-loan officers had quotas to meet as well — only a few could have made more money referring clients to Jacobson.

Her declaration proves that she violated several company policies, Suris said. According to Wells Fargo, Jacobson was more like a technical glitch than a cog in a well-oiled machine. Back then, only 10 percent of the company’s mortgage business was subprime, he said.

“Ms. Jacobson is making unfounded and opportunistic accusations that are offensive, inaccurate, and contrary to Wells Fargo’s commitment to fair, responsible and unbiased lending practices,” Suris said.

There is one thing, however, that Wells Fargo does not dispute: Jacobson was extraordinarily successful at what she did.

She churned out roughly $50 million in loans annually for Wells Fargo, making her the top-producing subprime officer in the country. She earned as much as $700,000 one year, more than seven times the company’s stated average for subprime-loan officers in her area.

As a reward, she got all-
expenses-paid trips to Cancun and the Bahamas, where the likes of Aerosmith and Jimmy Buffett performed for employees, according to her testimony. She bought a home in Federalsburg, Md., with her husband, an investment property down the street and a vacation house in Virginia.

This was the good life. She didn’t ask a lot of questions.