California Calls U.S. Bank a 'Slumlord'
LOS ANGELES (CN) - California says U.S. Bank National Association neglects hundreds of foreclosed properties and uses shady practices to evict hundreds of tenants from rental units, making it "one of the largest slumlords in the City of Los Angeles."
Los Angeles prosecutors, on behalf of the state, sued dozens of U.S. Bank trusts that hold title to more than 1,500 foreclosed properties in the city.
In a news release, the city attorney's office said U.S. Bank could be liable for hundreds of millions of dollars for allegedly allowing more than 170 properties to fall into disrepair.
In its 85-page lawsuit in Superior Court, California says U.S. Bank "has become one of the largest slumlords in the City of Los Angeles."
"Since at least July 2008, defendant has become the owner of thousands of residential properties in the city, through foreclosure of mortgages held in mortgage-backed securities trusts, which it has completely failed to maintain in violation of municipal, state, and federal law," the complaint states. "As a result, hundreds of properties have fallen into disrepair, causing blight and destabilizing communities."
According to the lawsuit, U.S. Bank trusts are made up of subprime mortgages "made to individuals who did not meet traditional underwriting standards." After the housing bubble burst in 2006, it became problematic for those individuals to refinance their homes, leading to a spike in defaults, the complaint says. After the resulting economic crisis of 2007-2008, U.S. Bank allegedly acquired title to thousands of foreclosed properties.
"Upon taking title to these properties, defendant U.S. Bank National Association disregarded virtually every one of its legal duties and responsibilities as owner, resulting in the creation and maintenance of an alarming number of vacant nuisance properties and substandard occupied housing units," the lawsuit states. "Defendant U.S. Bank National Association has engaged in this business practice since at least July 2008."
Though community groups, city officials and housing agencies put the bank on notice of its failure to maintain the properties, the bank has done nothing, California claims.
Poor communities bore the brunt of the bank's alleged unlawful practices, causing "decreased property values on such a large scale that neighborhoods have been destabilized and communities harmed," the lawsuit claims.
Most of the foreclosed properties are in south Los Angeles and northeast of San Fernando Valley, according to the city attorney's office.
California says the burden has fallen on the City of Los Angeles to board, fence and clean the offending properties. Included in the complaint are photographs depicting the unsanitary and dangerous conditions of some of the properties.
It also accuses U.S. Bank of using underhanded tactics to evict low-income tenants from rental units in foreclosed properties. The state cites the bank's practice of offering "cash for keys," where the bank offers small amounts of cash to tenants so they will vacate properties at short notice.
The bank also charges excessive rent and allows utility companies to shut off water and gas "for extended periods of time," according to the complaint.
"Such unlawful, unfair and fraudulent business acts and practices by defendant U.S. Bank National Association has resulted in the creation and maintenance of hundreds of substandard, uninhabitable occupied and vacant nuisance properties; public nuisances; and the unlawful eviction of hundreds of tenants throughout the city," the complaint says.
But U.S. Bank spokesman Tom Joyce told Courthouse News that it was "extremely disappointed that the city attorney's office has chosen to file this lawsuit."
"The city attorney has chosen the wrong party - we are not the owners of the properties, nor are we responsible for the servicing of the properties," Joyce wrote in an email. "The homes are owned by trusts, consisting of investors, and are serviced by other companies. Those companies are responsible for maintenance of the properties and compliance with city ordinances. Our role as trustee is purely administrative."
Joyce added that U.S. Bank had been in "extensive discussions with the city attorney's staff in an effort to identify and resolve any issues."
City attorney Carmen Trutanich and assistant city attorney Tina Hess filed the lawsuit on behalf of the state.
This latest lawsuit follows city prosecutors' 2011 enforcement action against Deutsche Bank, which was also accused of allowing properties to fall into disrepair.
The city attorney's office did not immediately respond to a request for comment.