Discriminatory mortgage lending practices prior to the housing bubble resulted in a flood of foreclosures in minority neighborhoods when the crisis hit.
That's according to the Los Angeles city attorney's office, which is suing both Wells Fargo and Citigroup on the allegations. In two different federal lawsuits, the city alleges that the mortgage lending practices of these two firms involved an intentional and continued discriminatory intent, which directly violates the Fair Housing Act.
Our Miami foreclosure defense attorneys understand that both firms are accused of "redlining' and then "reverse redlining." First, the lenders would decline to extend any mortgages at all in largely minority communities. Then after some time had passed, the lender would target those in HIspanic and black neighborhoods and sell them loans that were predatory in nature.
The city attorney's office said that when borrowers were left underserved and vulnerable by years of mortgage loan denials. So when the banks did finally begin to offer them loans - even subprime, predatory loans that they could not afford - they all but jumped at the chance.
These communities were subsequently left devastated by foreclosures when the housing market imploded. Many were delinquent on their accounts, yet they were denied the opportunity to refinance.
While both banks have denied these claims, the reality is that a loan in a minority neighborhood of Los Angeles is five times more likely to end in foreclosure as a loan extended for a home in a predominantly white neighborhood.
This affected far more than just the individuals who had taken out these subprime loans. When huge swaths of housing in these neighborhoods went into foreclosure, property values of the homes around them fell dramatically. It also created a major blight problem that resulted in headaches in terms of who would clean up the vacant properties and make sure they weren't overrun with crime.
In many cases, the attorney's office alleges, it was the city that was left to pick up the tab.
In L.A. alone, it's been estimated that the housing crisis between 2008 and 2012 resulted in more than 200,000 foreclosures and cost the city more than $480 million in lost property tax revenue. The city estimates it lost an additional $1.2 billion during that same time for the cost to bolster safety efforts, property maintenance and trash removal.
The city is also currently embroiled in litigation with Deutsche Bank AG and US Bancorp, which the city contends wrongly evicted people from their homes, creating extensive urban blight. Those firms insist they aren't to blame for a natural neighborhood decline.
However, there was nothing natural about the fact that so many people lost their homes within such a short period of time. At this point, we know the reasons had to do with the aggressive sale of subprime mortgages to unqualified buyers. It had to do with the cover-up actions that concealed the true status of these loans to investors. It was the refusal to modify the loans of borrowers who became delinquent in their payments, instead robo-signing documents to get foreclosure cases quickly shoved through the system.
Just last month, Wells Fargo revealed that it will have to pay more than $330 million to resolve allegations that it misled Freddie Mac and Fannie Mae regarding risky mortgage securities. The bank has paid another $85 million to settle a host of civil charge allegations that it falsified loan documents and pressed borrowers into subprime loans.
Both Wells Fargo and Citigroup were also part of the national $25 billion mortgage fraud settlement reached last year.
If you're battling foreclosure in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don't miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on "Mortgage Wars," discussing foreclosure topics that matter to YOU.
LA Sues Wells Fargo, Citigroup Over Foreclosures, Dec. 5, 2013, By Robert Jablon, Associated Press
More Blog Entries:
Bank Allows Profits to Trump Humanity in Foreclosure Case, Dec. 3, 2013, Miami Foreclosure Lawyer Blog