Fair-Housing Actions Against Big Banks Crumble in LA

LOS ANGELES (CN) – Rejecting claims that Bank of America and Wells Fargo discriminated against Latino and black borrowers through predatory home loans, the Ninth Circuit found Friday that Los Angeles offered little evidence that the practices were bank policy.

In 2013, the city filed two lawsuits under the Fair Housing Act claiming that the banks’ lending practices led to disproportionate foreclosures in minority neighborhoods after the 2008 financial crisis and Great Recession.

City Attorney Mike Feuer said property-tax revenue plummeted in parts of the city after the collapse of the housing market, leaving Angelenos with the bill to police and maintain abandoned and foreclosed homes. The estimated cost to LA was $1 billion, according to Feuer, and he made similar legal claims against Citigroup and Chase.

But in two unpublished rulings issued Friday, a three-judge Ninth Circuit panel affirmed U.S. District Judge Percy Anderson’s ruling for Bank of America and Judge Otis Wright’s ruling for Wells Fargo.

In the Wells Fargo case, the panel agreed with Wright that the city failed to provide evidence of a discriminatory loan within the two-year statute of limitations, and did not make a robust enough showing of “disparate impact” on minority borrowers.

The city had pointed to financial incentives for loan officers to issue more expensive loans to minorities, evidence the banks aimed marketing materials at low-income borrowers, and a failure to monitor loans. But it was not enough for the panel to rule in the city’s favor.

“The city failed to demonstrate how the first two policies were causally connected in a ‘robust’ way to the racial disparity, as they would affect borrowers equally regardless of race, and the third is not a policy at all. Because the city did not raise a genuine issue of material fact as to a policy with a robust casual connection to any racial disparity, summary judgment on the Fair Housing Act claim was warranted,” the Ninth Circuit memorandum states in City of Los Angeles v. Wells Fargo & Company.

Anderson’s ruling for Bank of America succeeded on similar grounds.

In that case, LA had claimed minority borrowers were up to three times more likely to receive a costlier loan than those extended to similarly situated white borrowers.

The appeals court used the same language in both rulings to reject the city’s unjust enrichment claim against the banks.

“The city’s injuries – lost tax revenue and increased spending on services – did not confer a benefit upon [the banks] and accordingly the city did not show a genuine issue of triable fact as to unjust enrichment,” the rulings state.

Circuit Judges Richard Paez, Michael Hawkins and Ronald Gould sat on the panel.

While Bank of America declined to comment, Wells Fargo said that it was pleased with the court’s ruling.

“We are pleased with the appellate court’s very quick decision to uphold the district court’s thoughtful ruling and to confirm the dismissal of the Los Angeles City Attorney’s mortgage case against Wells Fargo,” Wells Fargo spokesman Tom Goyda said.

 

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