Reporters wishing to speak with an attorney working on the Fair Housing Act discriminatory lending cases are invited to contact Joel Liberson, Rachel Geman, or Sherrie R. Savett. We welcome media inquiries.
Background on the Cases
The City of Miami filed lawsuits against Wells Fargo, Bank of America, Citigroup, and JP Morgan for issuing discriminatory loans to minority borrowers in violation of the Fair Housing Act. The loans received by minority borrowers were more expensive than the loans issued to white borrowers with similar characteristics such as FICO scores, debt to income ratios, and loan to value ratios. The discriminatory loans issued to minority borrowers were more likely to result in foreclosure than the loans to the white borrowers. Similar lawsuits have been filed in Baltimore, Memphis, DeKalb County (Georgia), Cook County, Illinois, Los Angeles, Oakland, and Miami Gardens. The Baltimore and Memphis cases settled after intervention by the U.S. Department of Justice. The City of Miami cases against Wells Fargo and Bank of America are currently pending before the United States Supreme Court, with an argument date of November 8, 2016., The U.S. Department of Justice has filed an amicus curiae brief in support of Miami and will split oral argument with counsel for Miami. The brief of the United States, along with the twelve additional amicus briefs supporting Miami, can be found at www.UnfairBankLending.com.
The complaints that Miami filed to initiate the lawsuits included allegations, supported by statements from former loan officers, that the banks intentionally discriminated against minority borrowers, as well as claims for disparate impact discrimination on the basis of a detailed statistical analysis. The City alleged that it suffered both monetary and non-monetary damages. The monetary damages consisted of a reduction in property tax revenue, loss of resources expended on fair housing, and an increase in out-of-pocket expenses to remedy the blighted conditions throughout the City. As documented in the amicus brief filed by the Fraternal Order of Police and Florida Professional Firefighters, vacant foreclosed properties lead to an increase in crime, fires, and arson, thereby requiring a significant increase in law enforcement resources. Moreover, the blighted conditions divert scarce police and fire resources away from other community needs and concerns. The non-monetary damages included impairment of the City’s long-standing objective to ensure its residents enjoy the personal, professional, and societal benefits of residing in an integrated society and to promote fair housing programs through the Department of Community Development.
The recent revelations from the landmark investigation initiated by Los Angeles City Attorney Mike Feuer demonstrate the scope and magnitude of misconduct perpetrated by some large banking institutions and corroborate some of Miami’s allegations. For example, the Los Angeles investigation found that Wells Fargo, in its relentless effort to generate profits to the detriment of its customers, created a pressure-cooker environment for its employees who were expected to maximize the number of new accounts opened or products/services sold to customers. Indeed, the Bank opened more than two million accounts without customer knowledge or approval, creating a litany of problems for these customers that will likely continue for the foreseeable future.
Prior to the revelations of that Los Angeles lawsuit, Miami’s complaint in this case asserted similar pressures on and incentives for loan officers to push more expensive and riskier mortgage products on customers, with minority customers proving to be the most vulnerable to these toxic mortgage loans. These loans should never have been issued in the first place, as all major banks purportedly engage in a comprehensive risk management process utilizing a variety of sophisticated analytic tools, databases, and reports which established that the high cost loans were far more likely to result in foreclosure. While the banks profess ignorance that these foreclosures could somehow cause municipalities to suffer injuries, any such assertion is directly refuted by numerous reports issued during the height of the lending boom.
Rather than accept responsibility for the devastating harm inflicted upon municipalities, the banks have instead decided to fight every step of the way. In the process, they have sought to eviscerate a portion of the Fair Housing Act, one of this country’s bedrock civil rights statutes. Indeed, on election day, the United States Supreme Court will hear an appeal from Wells Fargo and Bank of America that expressly seeks to significantly weaken the remedial provisions of the Act while enabling these banks to avoid any liability for the damages they inflicted upon communities.