(CN) – A lawsuit accusing Wells Fargo of violating the Fair Housing Act by offering predatory loans to minority homebuyers will advance, a federal judge ruled Friday.
The city of Oakland sued Wells Fargo in September 2015, claiming it steered minority homebuyers toward high-risk loans, increasing foreclosures and damaging Oakland’s housing market to the tune of $50 billion.
The city says that not only did the foreclosed homes depress its property values, but they also triggered a spate of problems – such as “criminal activity” and fire hazards – that the city had to deal with.
Although Wells Fargo fought to dismiss the case at the end of 2017, U.S. District Judge Edward Chen found merit in the city’s claim that Wells Fargo damaged its property tax revenues and increased its municipal expenditures.
“Oakland suggests based on aggregative data that it can prove there is a clear quantifiable link between WF’s [Wells Fargo’s] challenged practice and foreclosure rates and consequent harm to the city,” Chen wrote in his 28-page order. “In particular, Oakland has proffered a specific statistical analysis in regard to its property-tax injury.”
This analysis could make it possible to calculate damages suffered by the city, even though the minority borrowers – and not Oakland – were the primary injured party, Chen said.
Because Oakland did not provide a similar analysis of costs from increased criminal activity or other adverse events related to the abandoned homes, Chen dismissed its claims for damages on increased municipal costs. However, he advanced its claims for an injunction that would stop the bank from targeting minority buyers for risky loans.
Chen also dismissed the city’s claims for non-economic damages, such as Oakland’s argument that the bank’s lending practices thwarted the city’s efforts to increase home ownership among minority populations.
“Indeed, at least in the short run, the availability of financing (though on unfavorable terms) could well have increased minority homeownership in Oakland,” he wrote.
The case is moving forward in the Northern District of California after being put on hold in 2016 while the Supreme Court reviewed Bank of America Corp. v. the City of Miami, which determined whether cities have standing to sue banks for their lending practices.
mined whether cities have standing to sue banks for their lending practices.