Lending

Supreme Court to consider Miami's predatory lending suit against Bank of America, Wells Fargo

Won't decide case, but could rule on city's ability to sue for lending discrimination

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The U.S. Supreme Court announced Tuesday that it will hear arguments during its next term on whether the city of Miami can sue Bank of America and Wells Fargo for alleged predatory lending.

According to Reuters and ScotusBlog, the Supreme Court granted a writ of certiorari to the banks, meaning it will consider the city’s lawsuits against Bank of America and Wells Fargo during its next term, which begins in October and ends in June 2017.

The Supreme Court will not rule on the merits of the lawsuits, but rather whether the city of Miami is allowed to bring the lawsuits, which accuse the megabanks of engaging in long-term mortgage lending discrimination in the city.

U.S. District Judge William Dimitrouleas initially dismissed the lawsuits in July 2014, ruling that the city lacked standing to sue, and that the alleged harm was too remote from the banks' conduct.

Miami originally filed lawsuits against Bank of America, Wells Fargo, and Citigroup in 2013, stating that the banks engaged in predatory lending to minority borrowers.

In its original lawsuit, Miami accused the lenders of "reverse redlining," which led to a large number of foreclosures, lower property tax collections and increased cost to the city to deal with the resulting property value loss and blight.

According to the city of Miami’s petition to the Supreme Court (provided by ScotusBlog), the city originally accused the banks of “disproportionately placing vulnerable, underserved [minority] borrowers in loans they cannot afford and then when a minority borrower who previously received a predatory loan sought to refinance the loan, . . . [the Bank] refused to extend credit at all, or on terms equal to those offered when refinancing similar loans issued to white borrowers.”

The city also argued that the bank’s alleged conduct caused the city to lose property tax income and absorb the costs of dealing with the foreclosed properties.

“When Banks engage in such discriminatory conduct, it has profound non-economic and economic consequences for the cities in which mortgaged properties exist, and Banks should be responsible for those consequences,” Miami’s complaint states.

“(The banks’) conduct has harmed the residents of Miami and impaired the City’s strong, longstanding and active commitment to open, integrated residential housing patterns and its attendant benefits of creating a stable community that increases professional opportunities and the quality of life in the City,” Miami’s complaint continues. “Additionally, (the banks’) conduct has caused the City to lose property tax revenues and required the City to pay the costs of repairing and maintaining properties that go into foreclosure due to discriminatory lending.”

The city appealed the Dimitrouleas’s ruling to a higher court. And in September 2015, the 11th U.S. Circuit Court of Appeals reversed the lower court’s dismissal of the city's claims under the federal Fair Housing Act.

Bank of America and Wells Fargo then appealed the Court of Appeals decision, while Citigroup elected not to appeal, according to the Reuters report.

And Tuesday, the Supreme Court agreed to hear arguments on whether the lawsuits will be allowed to proceed.

According to the Supreme Court’s list of grants for its next session, the separate lawsuits against Wells Fargo and Bank of America will be consolidated, at least in terms of the Court’s potential decision to rule on whether Miami will be allowed to pursue the suits.

According to the Supreme Court document, oral arguments in the case will last a total of one hour.

In a statement, a Wells Fargo spokesperson said that the bank is eager to present its case. “We appreciate the Supreme Court’s decision today and look forward to presenting our strong argument that the city does not have standing under the Fair Housing Act to make the claims it put forth in its lawsuits against Wells Fargo and other lenders,” the Wells Fargo spokesperson said.

Bank of America also shared its eagerness to argue the case in front of the Supreme Court.

“Bank of America is fully committed to the anti-discrimination principles underlying the Fair Housing Act and supports the law’s role in protecting individuals from being unfairly deprived of housing,” Bank of America spokesperson Lawrence Grayson said in a statement. “But we believe that a municipality seeking purely monetary recovery is not covered by the statute, and we welcome the Supreme Court’s scrutiny and clarity.”

[Update: This article is updated with statements from Wells Fargo and Bank of America.]

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