Wells Fargo & Co. lost a bid to dismiss a lawsuit by the city of Los Angeles accusing the bank of targeting minority borrowers with "predatory" mortgages that caused a disproportionate number of foreclosures.
U.S. District Judge Otis Wright II in Los Angeles said the city's allegations were legally sufficient to proceed with the case.
The city sued Wells Fargo, Citigroup Inc. and Bank of America Corp. last year, saying the three mortgage lenders engaged in discriminatory practices since at least 2004, placing minority borrowers in loans they couldn't afford and driving up the number of foreclosures in their neighborhoods.
Los Angeles homeowners lost about $78.8 billion in home values as the result of 200,000 foreclosures from 2008 through 2012, the city said, citing a report by the Alliance of Californians for Community Empowerment and the California Reinvestment Coalition. The lost property tax revenue to the city has been $481 million, according to the complaints.
The city seeks to hold the banks liable for lost tax revenue and increased municipal services stemming from the foreclosures. The ruling Wednesday only relates to the lawsuit against Wells Fargo, the largest home lender in the U.S.
"The court's decision to allow the city attorney's lawsuit to proceed, while disappointing, in no way suggests that the claims ultimately will prevail," Tom Goyda, a spokesman for San Francisco-based Wells Fargo, said in a statement.Copyright © 2015, Los Angeles Times