Following the failure of Wells Fargo & Company (WFC) in May to dismiss a lawsuit filed by Los Angeles City last year, the bank’s appeal was rejected yet again by the U.S. District Judge – Otis Wright II. The bank may face the lawsuit that accuses it of discriminatory lending practices towards minority borrowers.
According to a Reuters report, Wright turned down Wells Fargo’s latest move. The bank requested for an appeals court ruling questioning Los Angeles’ legal position for claiming compensation under the U.S. Fair Housing Act.
It is alleged that Wells Fargo was involved in predatory lending practices since 2004 and provided overcharged (higher fees and interest rates) loans to minority borrowers. This led to increased number of foreclosures. Precisely, the bank granted loans without paying any heed to the credit-worthiness of the minority borrowers. This consequently resulted in defaults and falling property prices.
Notably, the mortgage crisis in Los Angeles led homeowners to lose around $78.8 million in home values following over 200,000 foreclosures between 2008 and 2012. Further, Los Angeles lost property tax revenue of around $481 million.
Owing to similar charges, the city also sued Citigroup Inc. (C) and Bank of America Corp. (BAC) last year, while JPMorgan Chase & Co. (JPM) was sued in June. The plaintiffs hold the banks accountable for tax revenue losses and rise in municipal services due to increased foreclosures.
Currently, Wells Fargo holds a Zacks Rank #3 (Hold).
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