The City of Los Angeles Fights Back in Response to the Mortgage Crisis. Los Angeles has filed a lawsuit against J.P Morgan over discriminatory and predatory lending on minorities resulting in hundreds of thousands of foreclosures still in effect today. FOR IMMEDIATE RELEASE
Broadview Mortgage – Katella Branch
*photo source: Los Angeles Times
Orange, CA – June 9th, 2014 – The city of Los Angeles filed a lawsuit on May 30th, 2014 against JP Morgan Chase & Co., the biggest bank in the United States. According at an article in The Wall Street Journal, the city issued a complaint alleging that J.P mortgage practiced in redlining and reverse redlining. Redlining is a process in which the banks deny applicants credit based on the neighborhood that the applicant lives in and/or chooses to live in, or simply denies the application based on said applicant’s race. Reverse redlining is a process in which lenders target specific neighborhoods or racial group with sub-prime financial products that are risky and unaffordable, when there were better options available. This was allegedly done by “imposing different terms and conditions on a discriminatory and legally prohibited basis” (The Consumerist). The complaint says that redlining and reverse redlining performed by J.P. Morgan has directly led to higher instances of foreclosure in LA.
According to The Consumerist, the loan officers also failed to educate applicants on adjustable-rate mortgages, and therefore applicants did not understand that their rates would go up and instead were under the impression that they were on a fixed-rate mortgage. As a result, the article states, J.P. Morgan declined to offer to refinance the loan or allow for loan modifications to these minority borrowers. The city of Los Angeles contends that this triggered a series of foreclosures throughout LA and that decreased property tax revenue and increased city maintenance costs as a repercussion of the bank’s actions. It now wants to collect damages for the burden that the city endured as a result of predatory lending that took place between 2004 and 2011. The Los Angeles Times contends that some of the evidence against the bank is reportedly derived from its own employees.
City Attorney, Mike Feuer stated that the banking giant engaged in “a continuous pattern and practice of mortgage discrimination in Los Angeles since at least 2004 by imposing different terms or conditions on a discriminatory and legally prohibited basis”. The city revealed data stating that, “J.P Morgan loans made between 2004 and 2011 in predominantly black or Hispanic neighborhoods were 2.19 times more likely to go into foreclosure than loans made in mainly white neighborhoods” (The Los Angeles Times).
The city is making the allegations based on a significant spike in foreclosures in the city, and it still feels the aftermath of the height of the crisis. In April, 1 out of every 1,464 properties in LA were in foreclosure. In some zip codes, the same figure was as high as 1 in every 350 properties according to an article by Yahoo! Finance. In that same article, it was detailed that, “the five Los Angeles ZIP codes with the most foreclosures are overwhelmingly inhabited by minorities, mostly African-Americans, according the RealtyTrac foreclosure numbers and Movoto Real Estate demographic information”. The city maintains that the predatory lending activities resulted in 200,000 foreclosures between 2008 and 2012.
In a past article that I wrote entitled, “Consumers Are Back to Paying Mortgages Instead of Credit Cards”, we visited the boom and bust cycle of the housing market in Los Angeles. The graph depicts the housing bubble, and the mortgage to credit card delinquency spread as a result of it. However, by simply focusing on the bubble and the significant decrease in home value over the years, it is clear to see the amount of financial burden that the city of Los Angeles had endured during those years.
Los Angeles was not even among the top 10 cities in America with the highest foreclosure rates, meaning that the boom and bust exhibited in the above graph does not even depict the hardest hit in the nation, while still exhibiting shocking devastation as a result of the 2008 mortgage crisis. However, out of the top 10 metro areas with the highest foreclosure rates, California did make the cut.
The city also claims that the total cost of foreclosures completed between 2008 and 2012 cost the city a total of a $481 million loss in tax revenue . This does not even include the costs associated with city services that were used as a response to the foreclosures. The Los Angeles Times maintains that services such as safety inspections, police and fire calls, trash removal, and property maintenance, ran up a tab of $1.2 billion on top of the $481 million. To make matters worse for the city, property values sloped downwards by $78.8 billion.
All of this does not go without mentioning the financial burden placed on the individuals who have been foreclosed upon or are still in the midst of foreclosure. Foreclosure can take credit scores down 100-300 points, which can thus result in higher interest rates when obtaining any line of credit, and it can also make the process of buying another home extremely difficult for that person/household for up to seven years.
The attorney, Mike Feuer, representing the city of Los Angeles has also filed similar lawsuits against Wells Fargo & Co., Citigroup Inc., and Bank of America Corp. last year. All banks denied similar claims made against them, according to The Los Angeles Times. Feuer says, “Los Angeles continues to suffer from the foreclosure crisis—from the blight in our neighborhoods to diminished revenue for basic city services. We’re fighting to hold those we allege are responsible to account, and to help bring back every community in our city”. J.P Morgan spokeswoman says, “ J.P. Morgan will vigorously defend itself on this case. We are disappointed the Los Angeles city Attorney is pursuing an adversarial approach to address city finances impacted by the recent economic downturn”. The spokeswoman continued to say that the economic downturn was “beyond our control”.
Broadview Mortgage values the opportunity to educate consumers to understand which direction that their current or future mortgage is taking them in. If you have any questions about the information herein, feel free to reach out to the Author, Brittany Williams, at Brittany.email@example.com . If you would like a quick pre-approval click here, and for assistance with down payment or buyer assistance, click here. You are also always free to give us a call toll free at (855) 692-7623.
Since 1988, Broadview Mortgage has distinguished itself through honest business relationships with clients, loyalty to employees, and commitment to empowering and educating those communities. Broadview Mortgage is a mortgage banker and direct lender made up of loan officers with years of experience in the firm and sheer excellence in customer service. The firm works to explore several financial solutions from which it’s clients may choose. Business is initiated and conducted on a word-of-mouth basis. Broadview Mortgage is a delegated underwriter for the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Federal National Mortgage Association (FNMA). Broadview is also approved to participate in several state, county and city programs for First Time Home Buyers.
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