U.S. District Judge Otis Wright II accepted the bid filed by
JPMorgan Chase & Co.
) 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. (
), Citigroup Inc. (
) and Bank of America Corp. (
) 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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