L.A. sues JPMorgan Chase, alleges predatory home loans to minorities
The city of Los Angeles accused JPMorgan Chase & Co. of steering minority borrowers into risky home loans they couldn’t afford, triggering a foreclosure wave that hammered property values and city coffers.
In a lawsuit filed Friday in U.S. District Court, the Los Angeles city attorney alleged the nation’s largest bank “has engaged in a continuous pattern and practice of mortgage discrimination in Los Angeles since at least 2004 by imposing different terms or conditions on a discriminatory and legally prohibited basis.”
The lawsuit is the latest in a city attempt to collect unspecified damages based on hits to city revenue from alleged discriminatory lending. That lending, the city alleged, caused a foreclosure flood that reduced property tax revenue, as well as increased costs for city services on those properties.
“L.A. continues to suffer from the foreclosure crisis -- from blight in our neighborhoods to diminished revenue for basic City services,” L.A. City Atty. Mike Feuer said in a statement. “We’re fighting to hold those we allege are responsible to account and to help bring back every community in our City.”
Late last year, Feuer filed similar suits against Wells Fargo & Co., Citigroup Inc. and Bank of America Corp. Those banks, some of the nation’s largest, have all denied the charges.
On Wednesday, a federal judge denied a motion from Wells Fargo & Co. to dismiss the case against the bank, the nation’s largest home mortgage lender.
In a statement, JPMorgan vowed to “vigorously defend” itself against the city’s lawsuit filed Friday.
“The facts don’t support their claims and are contradicted by our demonstrated commitment to minorities in the Los Angeles area,” company spokesman Jason Lobo said in a statement.
“We are disappointed the L.A. City Attorney is pursuing an adversarial approach to address city finances impacted by the recent economic downturn,” Lobo said, adding that the downturn “was beyond our control.”
The JPMorgan suit cites a report from low-income advocacy groups that claimed the mortgage crisis resulted in 200,000 foreclosures in Los Angeles from 2008 through 2012, a wave that depressed property values, and in turn, city property tax revenue by $481 million.
In addition, the local government costs for safety inspections, police and fire calls, trash removal and property maintenance for those foreclosures have hit an estimated $1.2 billion, according to the California Reinvestment Coalition and the Alliance of Californians for Community Empowerment.
The JPMorgan lawsuit, like the others, accuses the bank of placing minority borrowers into riskier loans than it did to “similarly situated” white borrowers. Those loans caused a disproportionate number of foreclosures in minority neighborhoods compared to white neighborhoods, according to the city.
When the housing market crashed, JPMorgan then curtailed credit to minority borrowers on a racially discriminatory basis, the lawsuit alleges. If the bank did lend to minorities, it continued to do “so on predatory terms,” the lawsuit alleges.
That practice continues “through the present and has not terminated,” the city alleged.