JPMorgan (JPM) Sees LA Lawsuit Dismissed - Analyst Blog

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U.S. District Judge Otis Wright II accepted the bid filed by JPMorgan Chase & Co. ( JPM ) regarding the dismissal of a lawsuit charged against the bank by the city of Los Angeles. The lawsuit accused the banking behemoth of discriminatory lending practices towards minority borrowers.

According to Wright, claims associated with Washington Mutual Inc. were invalid under a federal law presiding over the wind-down of failed banks. However, LA was permitted to file a revised complaint related to JPMorgan's lending practices excluding WaMu's. Notably, JPMorgan had purchased the failed WaMu in Sep 2008.

It has been notified that JPMorgan was involved in predatory lending practices since 2004 and provided overcharged (higher fees and interest rates) loans to minority borrowers, leading to increased number of foreclosures. Moreover, the bank has been accused by the city of discriminating against borrowers in providing loans based on their race.

Notably, the mortgage crisis in Los Angeles led homeowners to lose around $78.8 million in home values following over 200,000 foreclosures from 2008-2012. Further, Los Angeles lost property tax revenue of around $481 million.

Los Angeles has sued Wells Fargo & Co. ( WFC ), Citigroup Inc. ( C ) and Bank of America Corp. ( BAC ) on similar charges in Dec 2013. Of these, Well Fargo's plea to dismiss the case was rejected by the U.S. District Judge. Deutsche Bank AG had also been previously accused by Los Angeles of letting the foreclosed homes in low-income regions to deteriorate into slum conditions. The case was settled in Jun 2013.

For JPMorgan, the dismissal of the lawsuit comes as a major relief. However, the company continues to face several cases and probes regarding its business conduct preceding the financial crisis. Though the bank has resolved many litigation issues in the past one year, increasing legal hassles keep dragging down its financials.

Currently, JPMorgan carries a Zacks Rank #3 (Hold).


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