While disappointment descended on
Wells Fargo & Company
Bank of America Corporation
) owing to their failed attempts to dismiss lawsuits filed by Los
Angeles City, these major banks perhaps have a reason to celebrate
now. The financial bigwigs have been able to escape from the
clutches of litigation filed by the City of Miami as a federal
judge dismissed the mortgage discrimination allegation against
The lawsuits filed by Miami in Dec 2013 in the U.S. federal court
in Florida alleged that the banks were involved in discriminatory
mortgage lending practices since 2004 that led to a spree of
foreclosures. The banks provided overcharged (higher fees and
interest rates) mortgage loans to minority borrowers. Precisely,
the banks granted loans recklessly without paying any heed to the
creditworthiness of the minority borrowers. This consequently
resulted in defaults and falling property prices.
Miami was seeking compensation under the 1968 Fair Housing Act for
lost property tax revenue owing to lower values and additional city
expenses in the affected areas. However, U.S. District Judge
William Dimitrouleas abandoned such a claim, ruling that the city
lacked standing for claiming compensation under the act.
Notably, BofA won dismissal of the lawsuit earlier this week.
Dimitrouleas stated that the claims made by Miami were "marginally
related" to the purpose of the act. The bank's involvement in the
city's alleged damage was too nominal to file a suit.
Miami also sued
JPMorgan Chase & Co
) for similar charges in June. However, the bank has not proceeded
with an appeal for the dismissal of the lawsuit.
The Los Angeles Chapter
Owing to almost similar charges, Los Angeles City sued Wells Fargo,
Citigroup and BofA last year, while JPMorgan was sued in June. The
plaintiffs hold the banks accountable for tax revenue losses and
rise in municipal services due to increased foreclosures.
U.S. District Judge Otis Wright II rejected Wells Fargo,
Citigroup and BofA's separate appeals for dismissal, ruling that
Los Angeles possessed grounds to seek claims under the fair-housing
While the Los Angeles lawsuit frowns upon these major banks, the
latest decision in favor of the banks in the Miami lawsuit provides
them some relief from additional legal woes.
Many major banks in the U.S. are already battling several mortgage
lawsuits that stemmed from the 2008 financial meltdown. Many of
these lawsuits have been settled while some remain to be resolved.
We believe such lawsuits may lessen with the gradual economic
recovery and continued efforts by regulators to bring in financial
Currently, Wells Fargo, Citigroup and BofA sport a Zacks Rank #3
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WELLS FARGO-NEW (WFC): Free Stock Analysis
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