“Predatory Lending” Claims by Cities and Counties Against Financial Institutions Escalate in 2014

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Cities and counties that have experienced increased foreclosure and vacancy rates in the aftermath of the housing market crash of 2007-2008, perhaps emboldened by recent court decisions, have recently filed several new “predatory lending” cases under the federal Fair Housing Act (“FHA”) against financial institutions. In the last six months, for example, Los Angeles, Miami, Providence, and Cook County, Illinois, have filed lawsuits under the FHA against a variety of mortgage lenders to attempt to recover lost property tax revenues and other damages.

Allegations in Recent Predatory Lending Lawsuits -

These new lawsuits share similar factual allegations and legal theories. The governmental entities assert that the mortgage lender defendants engaged in “reverse-redlining” by aggressively targeting minority communities within the city or county for subprime, Alt-A and other home mortgages that were not sustainable by the borrowers and thus were, in essence, destined to fail. In some cases, the plaintiffs also assert that lenders engaged in traditional redlining by improperly refusing to lend to borrowers in minority communities. The plaintiffs assert that these alleged predatory lending practices caused erosion of city and county tax bases, loss of property tax income and other costs related to abandoned or vacant properties. Plaintiffs allege that the practice of specifically targeting minority communities for subprime loans or, conversely, curtailing lending to minority communities, constitutes intentional discrimination on the basis of race or ethnicity in violation of the FHA. Plaintiffs typically seek injunctive relief, compensatory damages, punitive damages and attorney’s fee awards under 42 U.S.C. §3613.

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Topics:  Abandoned Property, Banks, Discrimination, FHA, Foreclosure, Lenders, Mortgages, Predatory Lending, Property Tax, Secured Lenders, Tax Revenues

Published In: Civil Procedure Updates, Civil Rights Updates, Constitutional Law Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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