– UPDATED –

Stephen Faison famously lived next door to America’s subprime nightmare.

Specifically, he lives beside one of the once-vacant Baltimore rowhouses cited in a lawsuit over Wells Fargo’s lending practices that just ended in a $175 million national settlement announced yesterday.

Faison was shocked to hear that the Wells Fargo payouts – coming as part of a 2008 multi-state U.S. Department of Justice discrimination complaint – will include $7.5 million to the city of Baltimore.

Baltimore had alleged as part of the litigation that houses that spiraled into foreclosure caused problems not just for borrowers but for the city – which was saddled with the lost taxes, lower home values, increased property crime and cleanup costs of an ocean of vacant blighted houses.

“That place was loaded with trash, you couldn’t see the house. And rats! It was bad,” Faison recalled, standing on the porch of his family’s house in the 2500 block of Shirley Avenue in Northwest Baltimore.

“We organized a cleanup, we just did it ourselves,” said Faison, who works, as it happens, for a private trash hauling company in the county and was able to get some receptacles. “We cleaned it up for the children.”

As part of the suit, minority home buyers, including some in Baltimore, are expected to receive somewhere between $1,000 and $3,500 if they had been improperly charged excessive fees and much more if they had been steered to sub-prime loans, according to the Department of Justice.

As for the second tier of victims, the city in general and people like the Faison family in particular, it’s unclear as yet how the settlement will be used to benefit them.

City officials have not said how they will spend the $4.5 million in down-payment assistance and the $3 million for other foreclosure-related initiatives. (Baltimore was one of eight metropolitan areas getting a total of $30 million for programs that help people make down payments or improve their homes.)

“We’ll never see a dime of that money,” Faison said bitterly, looking out over a street that’s still pockmarked with boarded up houses. “And we’re the ones that had to live with all the trash and those rats.”

“Ghetto Loans”

The Shirley Avenue house is among 374 properties that went into foreclosure whose owners, the city of Baltimore alleged, were singled out for high-cost loans by Wells Fargo as part of a “reverse-redlining” scheme.

The victims, the city charged in its civil complaint, were predominantly African Americans targeted for loan products they couldn’t afford or steered into them, even though they may have qualified for cheaper conventional loans.

One loan officer described, in an affidavit filed as part of the lawsuit, how the bank targeted black churches and zip codes in the city and in Prince George’s County and Southeast D.C. and how bank employees routinely referred to blacks as “mud people” and sub-prime loans in minority communities as “ghetto loans.”

But the company admitted no wrongdoing yesterday and said in a statement that it stopped making subprime loans in 2008 and that it will no longer finance mortgages through independent brokers.

“Wells Fargo is settling this matter because we believe it is in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight, and to instead devote our resources to continuing to contribute to the country’s housing recovery,” said Mike Heid, president of Wells Fargo Home Mortgage.

Wells Fargo’s lawyers had argued that the city’s wounds are “self-inflicted” by policies that led to its vacancy problem, including weak code enforcement that encouraged investors and “flippers.”

Indeed, the rat-ridden house next door to the Faisons, 2520 Shirley Avenue, may have illustrated that argument.

As Edward Ericson Jr. pointed out in a detailed City Paper article in 2009, the mortgage on 2520 Shirley Ave. did not appear to have been purchased by a duped African-American  owner but by an investor in multiple properties named Balvinder Singh who  was part of “a mortgage fraud scheme that stretches across four states.”  

Asked by Ericson, City Solicitor George Nilson said it doesn’t matter whether the lender employing predatory tactics sells to an owner-occupant or an investor “they are just as in violation of the Fair Housing Act.”

The Baltimore litigation described how foreclosures skyrocketed in 2008, how since 2000 more than 33,000 homes had fallen into foreclosure, and how, in the last quarter of 2008, they jumped 26 percent.

The settlement was the second-largest of its kind in the department’s history, Justice officials said yesterday.

House Occupied but Rats Remain

Some things have improved on Shirley Avenue since The Brew first spoke with Faison for a June 2009 story. [Other media contacted Faison eventually, as well. Speaking to CNN, Faison called the property “a rat hotel.”]

The house next-door is now occupied by a family, Faison said, describing his new neighbors as “nice.” Instead of trash and overgrown bushes, the porch of the house next door was bright with flowers and had a charcoal grill and child’s bicycle yesterday.

Faison’s father, Richard Faison, had told The Brew in 2009 that the area was crime-ridden, that thieves would steal clothing off the laundry line and that loiterers possibly were using the house to do drugs.

Crime, lately hasn’t been so bad, Stephen Faison, 28, told The Brew.

Still, he said, some troubles remain as bad as ever – in particular the rat problem from the next-door house.

“Her landlord is not taking care of that, it’s not her fault,” Faison said. “The rats are still tunneling from that house, over to my house, through the basement. I just patched the holes down there again two weeks ago.”

There are still boarded-up houses on Shirley Avenue, several right across the street from Faison’s home. Elsewhere on the street the homes are occupied and well-kept.

“We need help over here,” Faison said.