The city of Los Angeles accused JPMorgan Chase & Co. of targeting minority borrowers with predatory loans in a lawsuit filed Friday in U.S. District Court. The lawsuit is the latest in the city's attempt to collect unspecified damages based on hits to city revenue from alleged discriminatory lending.
That lending, the city argues, caused a foreclosure flood that reduced property tax revenue and increased costs for city services on those properties.
The claim against New York-based JPMorgan is the most recent in a series of lawsuits by municipalities across the U.S. to hold mortgage lenders responsible for fallout from the collapse of the housing market. Last week, Providence, R.I., sued Banco Santander SA's U.S. unit, alleging discriminatory lending in the years after the recession.
In Friday's suit and others filed last year by Los Angeles against Wells Fargo, Citigroup Inc. and Bank of America Corp., the city accuses the banks of historically "red-lining" black and Hispanic areas as no-loan zones. It claims the lenders engaged in biased practices since at least 2004 by placing minority borrowers in mortgages they couldn't afford and driving up the number of foreclosures in their neighborhoods.
Starting in the late 1990s, the banks engaged in "reverse red-lining" by flooding the areas with subprime mortgages even when minorities qualified for better terms, according to the complaint. Earlier last week, a federal judge denied a motion from Wells Fargo & Co. to dismiss a similar case against that bank, the nation's largest home mortgage lender.
"L.A. continues to suffer from the foreclosure crisis, from blight in our neighborhoods to diminished revenue for basic city services," City Attorney Mike Feuer said in a statement. "We're fighting to hold those we allege are responsible to account."
'Fair Terms'
JPMorgan since 2009 has declined to offer refinancing or loan modification to minority customers on "fair terms," according to the complaint. In a statement, JPMorgan vowed to vigorously defend itself against the citys lawsuit.
The lawsuit cites a report from low-income advocacy groups that claimed the mortgage crisis resulted in 200,000 foreclosures in Los Angeles from 2008 through 2012, a wave that depressed property values, and in turn, city property tax revenue by $481 million.
In addition, the local government costs for safety inspections, police and fire calls, trash removal and property maintenance for those foreclosures have hit an estimated $1.2 billion, according to the California Reinvestment Coalition and the Alliance of Californians for Community Empowerment.
"We are disappointed the L.A. city attorney is pursuing an adversarial approach to address city finances impacted by the recent economic downturn," JPMorgan spokeswoman Suzanne Ryan said in an e-mailed statement. "The downturn was beyond our control."
Counties encompassing Chicago and parts of Atlanta have made similar claims in lawsuits against units of Bank of America and HSBC Holdings Plc. The banks deny the claims, which allege violations of the Fair Housing Act of 1968.
The case is City of Los Angeles v. JPMorgan Chase & Co., 14-cv-04168, U.S. District Court, Central District of California (Los Angeles.)
