JPMorgan Chase & Co. won dismissal of claims by Los Angeles accusing the bank’s Washington Mutual unit of targeting minority borrowers with predatory loans, while a judge said the allegations could be refiled against the parent company.
U.S. District Judge Otis Wright in Los Angeles ruled that while claims related to Washington Mutual Inc. were barred, the city could revise the lawsuit to focus on Chase’s lending practices during and after JPMorgan bought WaMu in 2008. The city lumped Chase and WaMu loan information together in the original complaint and has 21 days to refile the lawsuit focusing on non-WaMu loans, Wright said.
The lawsuit is one of at least four filed by Los Angeles against banks for allegedly flooding minority neighborhoods with subprime mortgages even when residents qualified for better terms. The city alleged the subprime loans drove up the number of foreclosures in the city. Wells Fargo & Co. (WFC) lost a court bid in May to dismiss a similar case brought by Los Angeles.
Los Angeles 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.
“We are pleased with this decision, and we will continue to carry out our strong commitment to Los Angeles residents,” Suzanne Ryan, a spokeswoman for New York-based JPMorgan, said in an e-mail.
Frank Mateljan, a spokesman for Los Angeles City Attorney Michael Feuer, said the city is weighing whether to appeal the ruling.
“In the meantime we are aggressively pursuing our claims against JPMorgan Chase,” he said by phone.
The case is City of Los Angeles v. JPMorgan Chase & Co. (JPM), 14-cv-04168, U.S. District Court, Central District of California (Los Angeles).