BALTIMORE– Baltimore Mayor Sheila Dixon and the City Council here filed a federal lawsuit against Wells Fargo Bank claiming it discriminated against black mortgage borrowers, charging an interest rate three points above the federal guideline.

Such concentration of high-rate loans in low-income areas has led to skyrocketing foreclosures, diminished neighborhoods, a ruined tax base and higher costs for delivery of city services, the suit alleges. The suit asks that Wells be barred from levying higher rates on blacks for both first mortgages and refinancings. It asserts that 65% of black borrowers paid higher rates compared to only 15% of whites. The bank denies that race was a factor in its subprime-lending program, but is based solely on credit risk.

The city government's suit also charges that Wells Fargo gave mortgage brokers higher commissions for loans carrying higher interest rates even when borrowers qualified for a lower one. Such practices are now forbidden by new federal lending guidelines, but were permitted at the time of the housing boom.