MIAMI–In a twist, some cities are now suing big banks for their alleged roles in the housing crisis.
The City of Miami has filed lawsuits against Bank of America and Wells Fargo alleging that the banks previous policies of targeting minority borrowers with unfair loans drove a crisis that led to widespread declines in property values and tax revenue, and increased expenses for police, fire and other services, due to the burdens of mass foreclosures, according to the New York Times.
Not surprisingly, the banks, which have already paid tens of billions of dollars for mortgage-related settlements with federal and state governments since the financial crisis, have challenged whether the city has the right to sue. The Supreme Court in June agreed to take up the question and is likely to hear oral arguments in the fall and will decide by July 2017, the Times reported.
“The court’s decision potentially could reshape the breadth and use of the Fair Housing Act, a landmark civil-rights statute that forbids discrimination in real-estate lending, rental property and other areas of the housing industry,” the New York Times said in its analysis. “The banks said Miami is stretching the bounds of a law meant to integrate neighborhoods, not fill tax coffers. They also dispute that Miami has proved its economic woes are a direct result of the banks’ actions.”
In its response, Wells Fargo said in a legal filing that its lending practices “did not cause the City’s financial difficulties any more than they caused the City to thrive in the years leading up to the financial crisis.” Bank of America expressed a similar sentiment in its filings, the Times reported.
“The banks believe a Supreme Court decision siding with Miami will leave them vulnerable to a torrent of mortgage litigation from anyone who said they were harmed by the housing bubble. Lobbyists warn that banks might curtail lending in urban neighborhoods because of the legal risk,” according to the Times.