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OAKLAND (CBS 5) ― It was one of the Bay Area's most trusted banks. Now some consumer advocates question its lending practices in certain East Bay neighborhoods.

The bank was World Savings, bought by Wachovia in mid-2006. They were a popular lender. But now some advocates want to know why so many of their loans were made in some of Oakland's low-income minority neighborhoods.

"It's very frightening, it's upsetting," said Annie McKenzie.

"Our neighborhoods are becoming blight because of all the foreclosures," said Diane Busby.

Welcome to zip code 94621, where homes are going vacant and residents are uneasy.

"We have quite a few foreclosures on this block," said Fannie Brown, who took us for a tour of her neighborhood. "We had older people that lived in the homes and they were here like today and tomorrow they were gone."

They were victims of the foreclosure crisis. And mortgage loans from one hometown company, World Savings, now Wachovia, are now under scrutiny from Oakland housing advocates like Maeve Elise Brown.

"When I have a caller who says I am in this negative loan. I never wanted this. When I ask them who their lender is I already almost know without fail, it's going to be World," said Brown. 

And what's she seeing? Complaints from clients, many of them elderly, who say they got adjustable rate mortgage loans from World called pick a pay loans, loans they say they now can't afford.

"If the sampling of World clients that I am seeing is at all representative, then I am deeply concerned for what may be coming down the road for our city," Brown said. 

Why? Because a study by Brown's non-profit organization, HERA, shows that in 2004 and 2005, during the height of the mortgage boom World

Savings was the top lender in five Oakland zip codes that Brown calls 'hot spots'. "We picked zip codes where there was a higher rate of home ownership by people of color. Low and moderate income neighborhoods in the city of Oakland and we found that World was the number one lender in the 5 zip codes that we selected."

And they found something else: An apparent racial disparity in World's lending for 2005: While the company had a little over 5% of the white mortgage market in Oakland, it had nearly 14% of the African American market in the city.

So is it evidence of targeting? Brown says: "I will say it's very hard for me to believe that there wasn't more marketing done to specific neighborhoods at least, at a minimum."

Mae Washington lives in one of the hot spot zip codes.

"I received a letter in the mail from the lender stating that I had been pre-approved," she told CBS5 Investigates. The loan was from World Savings, who held her mortgage at the time, but offered to refinance it with what sounded to her like a better deal: A pick a pay loan offering a lower monthly payment. "I was thinking that you know, it was something that was going to be good for me."

But now? "I think it's a terrible loan," she said.

Because like many others, Washington didn't know that paying that lower minimum payment each month meant her principal loan balance would increase over time by thousands of dollars.

"My principal went up by $20,000 to $25,000 that I owed, in a year." Now she says she doesn't know if she'll be able to keep up with her rising payments.

"I'm riding on faith," she admited.

And it turns out, Many World Savings customers in those neighborhoods could not. a CBS5 analysis of data provided by Realty Trac shows that 3 of the 5 zip codes identified by HERA led the way in numbers of World and Wachovia foreclosure filings in Oakland over the past 3 years.

The response from World Savings' owner Wachovia? A company spokesperson says the vast majority of those loans are no longer in foreclosure because owners "either sold their home, modified their loan or worked out a debt forgiveness plan." And regarding HERA's findings, the spokesperson says the group is "jumping to conclusions their data doesn't support."

But for Fannie Brown back in the neighborhood, numbers don't tell the story. The empty windows of abandoned homes do.

Read the full HERA foreclosure report (pdf.) at:
www.heraca.org/

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