Citigroup Inc. (C) and Wells Fargo & Co. were accused of discriminatory mortgage lending by the city of Los Angeles, which seeks damages for reduced property tax revenue and the costs of maintaining foreclosed properties.
The city filed complaints against both banks yesterday in federal court in Los Angeles. Bank of America Corp. was accused in a lawsuit filed today of engaging in discriminatory mortgage lending, Los Angeles City Attorney Mike Feuer said in a statement.
The three banks have been engaged in discriminatory lending to minority borrowers since at least 2004, which placed the borrowers in loans they couldn’t afford and caused a high number of foreclosures in minority neighborhoods, Los Angeles said in the complaints.
That the banks’ foreclosures are so “disproportionately concentrated in minority neighborhoods is not the product of random events,” according to the complaints. It reflects and is fully consistent with the banks’ “practice of targeting minority neighborhoods and customers for discriminatory practices and predatory pricing and products.”
Homeowners in the second-largest U.S. city lost about $78.8 billion in home values as the result of 200,000 foreclosures from in 2008 through 2012, the city said, citing a report by 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.
$569 Million Paid
Wells Fargo and Bank of America agreed to pay a combined $569 million during the past two years, in the two biggest residential cases in the history of the Fair Housing Act and the Equal Credit Opportunity Act. The government alleged borrowers with loans from Wells Fargo and Countrywide, the biggest U.S. mortgage lender when it was acquired by Bank of America in 2008, were more likely to be put in subprime loans if they were black or Hispanic, even when they qualified for lower-cost mortgages.
“We have a firm commitment and strong track record for fair lending,” Simon said in an e-mailed statement. “We responded with urgency to rising mortgage defaults that resulted from the country’s severe economic downturn and the personal financial hardships, unemployment and underemployment, divorce, and medical disability, chief among them, that resulted for so many Americans.”
Liz Fogarty, a spokeswoman for New York-based Citigroup, said the lawsuit is without merit.
“Citi is proud of our efforts to make sure our lending standards are fair to all of our customers,” Fogarty said in an e-mailed statement. “Citi considers each applicant by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis.”
Tom Goyda, a spokesman for San Francisco-based Wells Fargo, said the accusations are baseless.
“Wells Fargo is deeply disappointed by the city attorney’s decision to file a meritless lawsuit rather than collaborate together to help borrowers and home owners in Los Angeles,” Goyda said in an e-mailed statement. “Wells Fargo has been a part of Southern California for over a century and we are proud of our record as a fair and responsible lender.”
The cases are City of Los Angeles v. Wells Fargo & Co. (WFC), 13-cv-09007, and City of Los Angeles v. Citigroup Inc., 13-cv-09009, U.S. District Court, Central District of California (Los Angeles).
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