The United States Supreme Court has agreed to hear a case filed by the
city of Miami regarding predatory mortgage lending schemes. The appeal,
filed by Bank of America and Wells Fargo, comes after the 11th Circuit Court of Appeals decided to allow the city to sue the banks directly
for violating the Fair Housing Act (FHA).
The case began in 2014, after Miami joined several large cities around
the country in filing lawsuits against major mortgage lender. The initial
lawsuit accused Bank of America, Wells Fargo, and Citigroup of targeting
minority borrowers with predatory loans.
Miami accused the mortgage lenders of “reverse redlining.”
Redlining is practice of denying services to residents of a certain area
due to the area’s racial or ethnic background. When an entity engages
in redlining, it purposefully raises prices and rates to keep minorities
from using those services. Reverse redlining, in contrast, is the practice
of targeting areas heavily populated by minorities with the purpose of
charging borrowers more than they could for white borrowers.
For example, in Miami’s petition to the Supreme Court, attorneys
for the cities wrote that the mortgage lenders disproportionately placed
vulnerable borrowers into mortgage loans that they could not afford, and
then either refused to refinance the loan when borrower got into financial
trouble, or failed to provide similar terms that the lenders provided
to white borrowers.
The Supreme Court will not decide whether or not the mortgage lenders engaged
in these practices. Instead, the Court has been asked to decide whether
the city of Miami is even allowed to bring such a lawsuit directly against
the mortgage lenders.
The mortgage lenders argue that the FHA does not allow a city to seek a
monetary award under the statute. They claim that the terms of the statute
only allow aggrieved person’s within the statute’s contemplated
“zone of injury” to file suit, and argue that the city’s
injury (declining property values and excessive foreclosures) was not
contemplated by the U.S. legislature. The lenders also claim that Miami
cannot prove that the lenders’ alleged actions were the actual cause
of the city’s declining property values.
The Supreme Court has agreed to hear the case during its next term, which
will begin in October and end in June of 2017. How the Court rules will
determine whether or not cities and metropolitan areas can use the Fair
Housing Act to hold mortgage lenders financially responsible for the damage
that the foreclosure crisis did to those areas.
If you are facing a mortgage foreclosure or are having problems making
your payments, the foreclosure defense attorneys at Loan Lawyers can help.
Our South Florida attorneys are skilled in negotiating a resolution when
homeowners can’t make their mortgage payments, and can help you
make a plan that protects your home. For a free consultation, contact
Loan Lawyers today by calling (888) FIGHT-13 (344-4813).