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Citigroup Must Face L.A. Discriminatory Lending Lawsuit

Citigroup Inc. (C), one of three mortgage lenders sued last year by Los Angeles for allegedly targeting minorities with “predatory” loans, lost its first attempt to dismiss the claims.

U.S. District Judge Otis Wright II, who last month denied Wells Fargo & Co.’s request to dismiss a similar lawsuit by Los Angeles, said the city’s complaint against Citibank provided sufficiently detailed allegations for the case to proceed. The judge didn’t rule on the merits of the claims.

“L.A. has already identified through publicly available loan data 1,200 discriminatory loans issued by defendants that have resulted in foreclosures,” the judge said.

The second-largest U.S. city sued Citibank, Wells Fargo and Bank of America Corp. in December, alleging that since 2004 they placed black and Hispanic borrowers in mortgages they couldn’t afford, which led to a disproportionate number of foreclosures in minority neighborhoods when the housing market collapsed in 2008.

Los Angeles seeks damages for property taxes it lost because of the foreclosures as well as for increased costs in municipal services in blighted neighborhoods. On May 30, the city filed a similar discriminatory lending lawsuit against JPMorgan Chase & Co.

‘Deep Commitment’

“This is not a ruling on the facts in the case, and we continue to believe the suit is without merit,” Mark Rodgers, a spokesman for New York-based Citigroup, the third-largest U.S. bank, said in an e-mailed statement. “Citi is proud of its deep commitment to make sure our lending standards are fair to all of our customers.”

Los Angeles, which previously sued Deutsche Bank AG as owner of foreclosed properties, and other cities have explored legal means to hold banks accountable for urban blight in the wake of the 2008 collapse of the U.S. housing market and financial crisis.

Homeowners in Los Angeles lost about $78.8 billion in home value as the result of 200,000 foreclosures from 2008 through 2012, the city said last year, 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.

The case is City of Los Angeles v. Citigroup Inc. (CITI), 13-CV-09009, U.S. District Court, Central District of California (Los Angeles).

To contact the reporter on this story: Edvard Pettersson in Federal court in Los Angeles at

epettersson@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg, Joe Schneider

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