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Los Angeles sues Big Banks over Real Estate Tax losses

City attorney takes aim at big banks

Los Angeles sues Big Banks over Real Estate Tax losses

Image courtesy of [stockimages] / FreeDigitalPhotos.net

Source: latimes.com
Author: Michael Hiltzik

Much of what Los Angeles City Atty. Mike Feuer alleges in his lawsuits against four big banks for their mortgage and foreclosure practices isn’t debatable.

In his latest lawsuit filed May 30 against JP Morgan Chase, Feuer alleges that mortgage lenders swarmed into low-income minority neighborhoods with easy but deceptive offers of credit to people ill-equipped to handle the economic burden. Federal regulators and financial analysts recognized long ago that predatory practices, such as steering some borrowers into loans with high costs and stiff terms even though they qualified for better loans, thrived in the sub-prime mortgage market.

“From 2002 to 2005, credit flooded into low credit-score ZIP Codes,” economists Atif Mian of Princeton and Amir Sufi of the University of Chicago write in their recently published book, “House of Debt.” In those neighborhoods, they observe, “mortgages originated for home purchase grew 30 percent per year, compared to only 11 percent in high credit-score areas.”

It’s not news that lenders imposed abusive foreclosure practices and terms that cost borrowers their homes and blighted their neighborhoods; in 2012, all four of the banks named by Feuer settled charges from 49 states and the federal government over precisely those practices for $25 billion.

Feuer’s lawsuits are an effort new to Los Angeles to bring such discriminatory practices to an end and extract compensation for their effect on the entire city.

They may also herald a newly aggressive era for the city attorney’s office, which under Feuer’s recent predecessors has honored its claim to be the “people’s lawyer” more through rhetoric than reality.

“The paradigm in many public law offices is to be principally defensive,” Feuer told me last week. “But we can be so much more than that.” Since taking office in July, Feuer has developed a vision of the city attorney as an uber-regulatory agency, riding herd on practices that harm the quality of life but aren’t being addressed by oversight agencies treating their industries with kid gloves.

Consider his crackdown on “patient dumping,” in which hospitals get rid of mentally disabled patients by depositing them on skid row. Feuer has extracted $750,000 in penalties, including grants to homeless service agencies, from two hospitals. And he is pressing all area hospitals to follow a common protocol governing the treatment and discharge of homeless patients.

“We ought to not only be reactive, but to look for ways to keep a problem from happening,” he says.

The bank lawsuits sound the same theme. Feuer’s feel for the impact of mortgage and foreclosure abuse reflects his background in public interest law, which included service as executive director of Bet Tzedek Legal Services, the Los Angeles public interest firm that assists the elderly, disabled and other disadvantaged clients.

He says his goal in filing the lawsuits against the banks — JPMorgan, Bank of America, Citigroup and Wells Fargo — was not so much to land them in court as to bring them to the table. Before filing, he sent the complaints to the banks, hoping to settle amicably.

“Obviously, that didn’t happen,” he says.

After the JPMorgan lawsuit was filed, the bank stated it was “disappointed the L.A. City Attorney is pursuing an adversarial approach to address city finances impacted by the recent economic downturn.” That’s a bit of a dodge: Feuer’s allegation is that city finances were affected directly by the bank’s behavior; as for the “recent economic downturn,” that resulted in part from the practices of JPMorgan and its Wall Street brethren. If you need to refresh your memory, read the report of the Financial Crisis Inquiry Commission chaired by former California Treasurer Phil Angelides.

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