Wells Fargo Escapes U.S. Supreme Court Review on Loan Purchases

By Chris Bruce

The U.S. Supreme Court Nov. 6 declined to consider a case alleging that Wells Fargo’s loan purchase practices violate a federal fair lending law.

The question was whether loan purchasers violate the Equal Credit Opportunity Act if they refuse to buy loans made to borrowers who list public assistance, such as housing vouchers, as income on their loan applications ( Alexander v. AmeriPro Funding, Inc. , U.S., 16-cv-01395, cert. den. 11/6/17 ).

Borrowers asked the justices to review a federal appeals court ruling in February that said Wells Fargo, as the purchaser of mortgage loans, isn’t subject to ECOA claims. The justices denied the petition.

The Consumer Financial Protection Bureau argued that ECOA covers secondary market players but the U.S. Court of Appeals for the Fifth Circuit disagreed. It said the CFPB’s position would bring about a “broad expansion” of ECOA liability.

The case arose in connection with several sets of plaintiffs. Some applied for loans directly to Wells Fargo. They claimed Wells Fargo refused to consider their public assistance as income for purposes of their applications. The Fifth Circuit ruled against them, saying they didn’t cite any specific practice by Wells Fargo that violates ECOA.

Meanwhile, other plaintiffs in the case applied for mortgages from AmeriPro Funding Inc. of Austin, which sells loans to Wells Fargo. They said AmeriPro also refused to consider their vouchers in evaluating their loan applications, saying that decision was driven by Wells Fargo’s secondary-market policy of refusing to buy loans that list public assistance income. The Fifth Circuit said those plaintiffs may sue AmeriPro under ECOA, because it’s an originator clearly covered by the statute. AmeriPro Funding, Inc., which did business as AmeriPro Home Loans, was acquired in 2016 by Guild Mortgage, a San Diego-based mortgage lender.

However, the Fifth Circuit upheld dismissal of the ECOA claims against Wells Fargo. According to the court, Wells Fargo, as the loan purchaser, isn’t covered by the statute. “The ECOA does not apply, and does not purport to apply, to arms-length transactions in the secondary mortgage market,” the court said.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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