The city of Los Angeles has reportedly dropped the discriminatory lending charge against Citigroup Inc.C . Interestingly, Citigroup's earlier plea to dismiss the same lawsuit had been rescinded by the U.S District Judge - Otis Wright II - in Jun 2014.
While Wednesday's court filing did not clarify the reason behind the dismissal of lawsuit, earlier filings state that lawyers of Citigroup had raised questions over the limited relevance of the U.S. Fair Housing Act (the lawsuit claimed violation of FHA) in this matter, since the act was aimed at providing fair housing only.
Notably, Los Angeles had filed a lawsuit against Citigroup in 2013, accusing the bank of engaging in biased lending practices since 2004. The city claimed that the bank provided restricted as well as overcharged (higher fees and interest rates) loan offerings to targeted minority borrowers.
This led to higher defaults and consequently an increased number of foreclosures, which lowered the city's revenues from property taxes as well as increased the expenditure for city services on these properties. In fact, Los Angeles claimed that the mortgage crisis led homeowners to lose around $78.8 million in home values following over 200,000 foreclosures during 2008-2012. Further, the city lost property tax revenues of around $481 million.
Last month, the city of Los Angeles withdrew similar charges against JPMorgan Chase & Co. JPM , citing mixed outcomes of legal actions.
Nonetheless, legal troubles are not yet over for Citigroup. Recently, a federal court overturned the dismissal of lending discrimination lawsuits filed by the city of Miami against Bank of America Corporation BAC , Wells Fargo & Company WFC and Citigroup (read more: BofA, Wells Fargo, Citi Must Face Miami Lending Bias Cases ).
Citigroup currently holds a Zacks Rank #4 (Sell).
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