Last Friday, the City of Los Angeles filed a lawsuit against JPMorgan Chase for targeting minorities for predatory mortgages and the subsequent economic damage when these loans went into default. The City Attorney, Mike Feuer, has already sued Wells Fargo, Citigroup Inc, and Bank of America for the same issues.
As Edvard Pettersson reported in Bloomberg News last week (Wells Fargo Can’t Shake L.A. Lawsuit Over Predatory Loans), a judge denied Wells Fargo’s attempt to have the lawsuit dismissed. The lawsuit cites research (The Wall Street Wrecking Ball: What Foreclosures Are Costing Los Angeles Neighborhoods) by the Alliance of Californians for Community Empowerment and the California Reinvestment Coalition, which found homeowners in Los Angeles lost about $78.8 billion in home value as the result of 200,000 foreclosures from 2008 through 2012 and lost property tax revenues of $481 million.
In addition to the City of Los Angeles, CRC and ACCE also looked at Oakland, San Jose, San Francisco, and Sacramento to assess the financial damage caused by predatory lending. See chart below. (Note: reports were published in September 2011)
Meanwhile, David Dayen questions in the Guardian (Foreclosed outta Compton: can LA stop racist mortgage lending by big banks?) if the City of Los Angeles will produce better results in their lawsuit than other cities have fared.
Beyond the bad loans being targeted to minority borrowers, a GAO report released a few months ago supports CRC’s position that homeowners of color and homeowners whose primary language isn’t English are receiving worse results when they do seek a loan modification.
The GAO found statistically significant differences in the rates of denials and cancellations of trial modifications and in the potential for re-default between populations protected by fair lending laws and other populations.
For three of four servicers analyzed, denial rates for failure to provide information to servicers were higher for Latino borrowers, as CRC found in our earlier report, “Race to the Bottom,” put out jointly with Urban Strategies Council. Counselors have pointed out in multiple CRC surveys that servicers not translating their written letters to borrowers or providing low quality verbal translation services may mean borrowers miss out on important notices, for example, a request for additional information. See GAO Report here: TROUBLED ASSET RELIEF PROGRAM: More Efforts Needed on Fair Lending Controls and Access for Non-English Speakers in Housing Programs
|City||Property Tax Loss||Lost Home Value||Est. Cost for City Services on Foreclosed Homes|
|Oakland||$75.3 million||$12.3 billion||$224 million|
|Los Angeles||$481 million||78.8 billion||$1.2 billion|
|San Francisco||$42 million||6.9 billion||$73.4 million|
|Sacramento||$108 million||17.7 billion||$620 million|
|San Jose||$135 million||$22 billion||$288 million|
The Wall Street Wrecking Ball: What Foreclosures are Costing Neighborhoods
September 15, 2011
CRC joined with the Alliance of Californians for Community Empowerment (ACCE) to analyze the full impact of foreclosures on a local level in five cities– Los Angeles, Oakland, San Francisco, Sacramento, and San Jose. Foreclosures lead to decreased home values in neighborhoods, lost property tax revenues, and increased costs to local government. The reports include policy recommendations that would stop the wave of foreclosures and stabilize communities.
For a link to the Oakland report,click here .
For a link to the Los Angeles report,click here .
For a link to the San Francisco report,click here .
For a link to the Sacramento report,click here .
For a link to the San Jose report, click here.