US Bank sued by city of Los Angeles for 'turning Wall Street fraud into Main Street blight'
|Good Jobs LA|
|US Bank is responsible for about 170 homes that have decayed into blightedness, the city of L.A. alleges.|
Minneapolis-based US Bank is one of the biggest, baddest slumlords in Los Angeles, the city alleges in a civil lawsuit filed yesterday.
The suit reportedly seeks "potentially millions of dollars in penalties and restitution" for properties that have decayed into blightedness under US Bank's ownership and for the wrongful eviction of tenants.
The city's allegations involve 1,500 foreclosed homes, about 170 of which have become blighted. In the lawsuit, the city calls US Bank "one of the largest slumlords in the city of Los Angeles."
According to the Los Angeles Times, large financial institutions like US Bank and Deutsche Bank, who the city sued under similar circumstances last year, serve as trustees for pools of loans that were turned into securities and sold to investors. When a borrower falls behind on one of those mortgages and has their home foreclosed, financial institutions become the owner.
During a press conference yesterday, L.A. City Attorney Carmen Trutanich said "the fraud committed on Wall Street, turns into blight on Main Street."
But both US Bank and Deutsche argue that responsibility for foreclosed properties actually lies with mortgage servicers who are contracted as property managers. As the Times notes, when a home isn't in foreclosure, those servicers are typically tasked with collecting and monitoring mortgage payments.
In a statement, US Bank Senior Vice President Tom Joyce said "like the city attorney, we are troubled by properties that are not maintained, which have a corrosive impact on neighborhoods and communities," but loan servicers are "responsible for the upkeep of homes and properties and for interacting with homeowners and/or tenants."
US Bank plans to bring the mortgage servicers into the lawsuit, Joyce added.
Ultimately, however, the L.A. city attorney's office believes property owners -- in this case, US Bank -- cannot shirk responsibility for the condition of their properties.
Says the lawsuit: "U.S. Bank National Assn. disregarded virtually every one of its legal duties and responsibilities as owner, resulting in the creation and maintenance of an alarming number of vacant nuisance properties." The city alleges it made numerous unsuccessful attempts to bring the problems to US Bank's attention before deciding to seek legal recourse.
Regarding the alleged illegal evictions, L.A. City Attorney Carmen Trutanich said yesterday that housing tenants "were intimidated and threatened with eviction, even deportation, in an effort by US Bank to clear the properties for resale."
L.A.'s lawsuit against Deutsche Bank is still working its way through the courts. Reuters notes that other American cities, like Memphis and Baltimore, have recently settled lawsuits against large financial institutions over mortgage industry practices that allegedly contribute to urban blight.
During yesterday's press conference, Trutanich characterized the city's lawsuit against US Bank as a "deterrent."
"It's a message to other banks; step up and do the right thing," he added.