Three metro Atlanta counties that sued Bank of America and its subsidiaries for discriminatory lending practices they say resulted in lower home values following the 2008 recession can continue their quest to recoup lost revenue from the bank, a federal judge said.
Judge Leigh Martin May ruled earlier this month that Cobb, DeKalb and Fulton counties could continue to seek damages against Bank of America and subsidiaries, including Countrywide Bank and Merrill Lynch & Co., for lending practices the governments said “caused African-American and Latino borrowers to disproportionately receive higher cost mortgage loans, leading to increased defaults and foreclosures, than similarly situated white, non-Latino borrowers.”
The suit claims the bank violated the Fair Housing Act and discriminated against minority borrowers by offering more onerous loan modifications than they did to white borrowers. It says the bank was more likely to foreclose on homes owned by minorities, and the bank’s decisions led to minority borrowers being approved for loans they could not afford.
The effect, the counties said in a suit first filed in 2016, was a loss of tax revenue as property values fell, and an increase in costs to process foreclosures and evictions.
The governments also said they had to spend more on police, fire and other municipal services to combat urban blight that occurred as a result of Bank of America’s actions.
In her Sept. 18 ruling, May largely denied Bank of America’s motion to dismiss the case. But the counties are no longer able to move forward with claims that would require the bank to repay them for police and other services provided at the homes.
In her order, May said the counties assumed a one-to-one connection between a vacancy as a result of the lending practices and the need for services at the address, though some services would have been needed regardless.
Additionally, May dismissed a claim that could have allowed the counties to recover money for unpaid water bills or taxes from telephone or cable service, because consumers could have cut the cord or not subscribed to some services in the first place.
The governments are still able to seek damages for lost property taxes and for the costs of foreclosing on homes. And they are still able to ask the bank to stop any remaining discriminatory practices.
County representatives declined to comment on the ruling, since the case is ongoing. In a statement, Bank of America spokesman Christopher Feeney said the bank is “fully committed to the anti-discrimination principles underlying the Fair Housing Act."
“Although the court allowed the litigation to move forward, we believe that the underlying claims are without merit,” he said.
Alan Weinstein, a professor emeritus of law and urban studies at Cleveland State University, said similar cases around the country are on hold after the Supreme Court voted in March to hear a case regarding Miami’s claim against Bank of America and Wells Fargo. An earlier ruling in that case provided much of the framework for May’s decision.
He said banks did “enormous economic harm” as a result of their lending practices. Bank of America has already paid hundreds of millions of dollars to private entities, he said, but an earlier decision in the Miami case opened the door for governments to also recoup some of their losses.
“There’s significant money at stake,” he said.
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