Los Angeles sues JPMorgan over 'predatory loans'

[SGOS]

http://finance.yahoo.com/news/los-angeles-sues-jpmorgan-over-predatory-loans-231417213.html

Los Angeles (AFP) - Los Angeles filed suit Friday against JP Morgan Chase, saying the US bank pushed minorities into higher risk loans they couldn't afford, helping trigger the foreclosure crisis.

The city is trying to recover damages for decreased tax revenues, arguing the rash of foreclosures caused property values to drop, and for the extra money it spent on city services because of the foreclosures.

"LA continues to suffer from the foreclosure crisis -- from blight in our neighborhoods to diminished revenue for basic city services," City Attorney Mike Feuer said in a statement.

"We're fighting to hold those we allege are responsible to account and to help bring back every community in our city."

The "mortgage discrimination," in effect since 2004, imposed "different terms or conditions on a discriminatory and legally prohibited basis," according to the lawsuit filed in federal court.

I suspect the banks will be found not guilty.  Otherwise, someone would have already won a lawsuit over this issue.  I think it depends on how the courts determine predatory lending.  If people are given false information about the load from the bank, I'd call it predatory, but the actual terms of the load are buried in the fine print, which people were supposed to read, but they may have failed to do, because people generally trusted bankers prior to the bank failures. 

On the other side of this issue, it might be nothing more than a political move by LA to appeal to the minorities that bought these loans.  This would be the case if LA realizes their suit is a lost cause.

Back in the 90's I almost did business with a predatory lender.  Well, that's how I would describe them.  They did fess up to what the terms of the loan were just as I was reaching for my pen. 

Until that point they had let me assume I was getting a fixed interest loan, which they confessed was actually what they called "a teaser loan" which would jump to a high rate of interest after 5 years.  I held off signing the contract and figured out that I could be looking at some serious financial issues in 5 years.  I then backed out of loan.  I had never heard of such a loan before, but by the time the banks were selling sub prime mortgages, more people would have been aware of flexible rate mortgages.

[GSOgymrat]

LA accuses the bank of refusing to issue mortgages to minority borrowers, while approving a white borrower with a similar credit history for the loan.

It also says the bank pushed minority borrowers into "high-cost and abusive mortgage loan products with predatory terms as compared to the mortgage loans issued to white borrowers."

These practices "have the purpose and effect of placing vulnerable, underserved borrowers in loans they cannot afford," the lawsuit says.


If the city attorneys can prove JP Morgan Chase was discriminating based on race perhaps they could win this.

[SGOS]

If the city attorneys can prove JP Morgan Chase was discriminating based on race perhaps they could win this.

I think it's an interesting case in many different aspects, and I'm surprised it hasn't come up before.  Maybe it has and I'm just not aware of it. 

The minority discrimination angle is interesting.  It might be the case that minorities had less income and were pushed into high risk rates because they had less income.  If they were pushed into high risk rates simply because of their minority status, that would be unfair and worthy of a civil suit in my opinion.

The old news is that the lack of banking regulation combined with bundling sub prime mortgages into securities that were sold by the banks to investors, removed all risk from lender banks to a point that banks had no incentive to check credit histories or do property appraisals. 

People and come to depend on ethical behavior from bankers and expected it.  Banks kept track of your interests because your interests were also their interests, but apparently they dropped the ethics when only their own interests were at stake.  When that need was removed, banks could just take the money and pass the risk on to the unwary, be they investors or borrowers buying homes.  While unethical, it apparently is legal but that's old news now.

[stromboli]

Sounds like, as GSO gymrat said, they are approaching it from the racial aspect for that reason. But I agree with SGOS. I don't see LA winning this one, if only because Chase has better lawyers.

[Solitary]

This reminds me of when I buy a car and people say read the fine print, If I really want to buy the car what good does it do to read the fine print? All contracts have them. "First, kill all the lawyers!"  Solitary

[Gawdzilla Sama]

Days that end in "Y".

[Surat1688]

Oh!!

*mod hat on*
Surat, I've removed your spam links.
Next time I'll remove your spamming self.

[AllPurposeAtheist]

The thing is the people who got screwed by Chase even if the city wins will see little if any of whatever settlement they might reach. I suspect it's more of a reelection ploy to say, "Lookie, we sued Chase!"

[Solitary]

  "A pessimist is what an idealists calls a realist." This really is a bait and switch routine that a lot of businesses use. My computer desk was advertised at a vey low price and when we went to get it they said it was only the floor model. I told the sails person, "I'll take it." I was told it wasn't for sale and showed them the ad and told them I'll take a knew one then. I was then told it will take a long time to get a knew one. I told them I would wait. After three months they final gave in after I threaten to sue them. I was in no hurry since I had one, but this one was solid mahogany with a roll top and normally very expensive.  Solitary

[SGOS]

This really is a bait and switch routine that a lot of businesses use.

It is if the terms of the loan are disclosed before you sign the papers.  If not, it's outright fraud.  If the fine print explains the loan, but the banker tells you something else, I'd call it fraud, but the courts may not.  I was told by a lawyer that real state law is closely controlled by written documents.  I had the impression that spoken words are ignored in property settlements.  It's all about the fine print.

I've often wondered during the real state bubble how fraudulent the banks really were and/or how stupid borrowers really acted.  Home prices were rocketing up so fast, that many people were speculating using the power of variable interest loans.  Many expected to sell the house in a couple of years at big profits before their mortgage payments went up.  And first time buyers were acting in a panic to buy a home any way they could before prices got even higher.  When the bubble broke, the speculators were caught with the "old maid".  Actual home buyers no longer had  the option to sell a home they could no longer afford.  Buyers disappeared, and the market crashed.

But it can't all be blamed on dishonesty and/or stupidity.  The government allowed banks to create an environment that actually nurtured dishonesty and stupidity, and risk taking. 

[AllPurposeAtheist]

The thing about real estate is the land never goes away no matter what you do to it. Buildings come and go and ownership does as well, but land itself remains.
I kind of wish I had a nickel for every contract that had a lot of *'s and †'s in them explained in tiny gray print on the back in language most lawyers couldn't explain on a good day.