L.A. sues Wells Fargo and Citigroup, alleging predatory lending
The city of Los Angeles accused banking giants Wells Fargo & Co. and Citigroup Inc. of a “continuous pattern and practice” of mortgage discrimination that led to a wave of foreclosures, reduced property tax revenue and increased costs for city services.
In twin lawsuits filed in U.S. District Court, the city alleged that both banks engaged in predatory lending practices and redlining that saddled minorities with loans they couldn’t afford and resulted in a disproportionately high number of foreclosures in their neighborhoods compared with white neighborhoods.
“Today we begin to address the devastating consequences of the foreclosure crisis in America’s second-largest city,” Los Angeles City Atty. Mike Feuer said late Thursday in announcing the actions.
The suits, he said, send “the firm message that we will use every tool at our disposal to fight for all Los Angeles taxpayers and neighborhoods.”
Both banks released statements calling the suits “baseless” and “without merit.” Wells Fargo, the nation’s biggest mortgage lender, said it was proud of its record “as a fair and responsible lender.” Citi said its lending standards are “fair to all” and its lending criteria are “blind to race, ethnicity, gender and any other prohibited basis.”
The suits cited reports from two advocacy groups for low-income and minority neighborhoods that claimed the mortgage crisis resulted in more than 200,000 foreclosures in Los Angeles from 2008 through 2012 and, in turn, in depressed property values, leading to an estimated loss of $481 million in tax revenue for the city.
In addition, the local government costs for safety inspections, police and fire calls, trash removal and property maintenance of all foreclosed L.A. houses has hit $1.2 billion, according to the California Reinvestment Coalition and the Alliance of Californians for Community Empowerment.
The suits, which do not specify the amount of damages sought, alleged that the banks’ predatory lending and redlining started in at least 2004 and still continues.
Los Angeles is seeking damages based on the reduced property tax revenue of foreclosed properties caused by the alleged discriminatory lending and for the increased costs for city services on those properties.