Tuesday, February 10, 2015

LAUSD's discrimination lawsuits against 3 major banks dismissed - LA School Report


judgeA federal judge in California has dismissed lawsuits brought by LA Unified against three major banks that the district accused of racial discrimination in mortgage lending, leading to a loss of millions in tax revenue for the district.

The lawsuits, which had been brought against banking giants — Wells Fargo, JP Morgan and Citigroup — were rejected by U.S. District Judge Otis Wright, who ruled in favor of the banks' legal arguments that local property taxes do not determine the school district's level of funding because state and local revenue are combined into one fund under state control, Reuters reported.

The lawsuits were filed in September and are similar to two brought against Wells Fargo and Citigroup by the city of Los Angeles, which are ongoing.

In a brief email to LA School Report, David Holmquist, general council for LA Unified, said, "I can simply say that we are currently reviewing the recent decision to determine our next steps."

In its lawsuits, LA Unified argued that the banks had violated the Fair Housing Act of 1968 by using "redlining" in how it lent money in the district. The suit accused the banks of both traditional redlining and reverse redlining. Traditional redlining refers to denying loans or credit based on an applicant's race, while reverse redlining refers to steering minorities into predatory loans they will likely not be able to afford.

According to the complaint, the banks then sold the subprime loans off in mortgage-backed securities to government-sponsored entities Fannie Mae and Freddie Mac or to private investors.

The complaint also stated that neighborhoods of color in the LA Unified district were flooded in the past decade with predatory loans by the banks, which in effect led to property tax revenue losses estimated to be $481 million.

Wells Fargo has already settled a number of lawsuits around the country where it was accused of redlining, including a $175 million suit brought by the federal government.

 



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