SLLC brief defends local government right to sue banks

Banks appealing decision giving counties right to sue under Fair Housing Act

In its Supreme Court amicus brief for Wells Fargo v. City of Miami and Bank of America v. City of Miami, the State and Local Legal Center  argues that Miami, and other local governments across the country, should have “standing,” or be able to sue banks, under the Fair Housing Act (FHA) for economic harm caused to them by discriminatory lending practices.

The brief argues local governments should have standing to sue banks for two reasons. First, discriminatory lending diminishes a local government’s tax base. Specifically, foreclosures deprive local governments of revenue.

When foreclosed properties sell, their prices are discounted by about 30 percent, reducing a local government’s tax base. Foreclosed properties also diminish the value of neighboring properties.

Second, foreclosed properties are expensive. Local governments “must provide substantially more public services — and expend far more public funds — to maintain these abandoned homes.”

The city of Miami claims that Wells Fargo and Bank of America targeted black and Latino customers in the city for predatory loans that carried more risk, steeper fees, and higher costs than those offered to identically-situated white customers. The city further claims the banks’ lending policies caused minority-owned property to fall into unnecessary or premature foreclosure.

The FHA makes it unlawful for banks to discriminate against mortgage recipients on the basis of race. To bring a lawsuit under the FHA the City of Miami must have “statutory standing,” in other words, “a cause of action under the statute.”

The Eleventh Circuit concluded Miami does have statutory standing. The banks are appealing that decision.

At least 12 other cities and counties have brought similar lawsuits against banks.

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NACo is a founder, a funder and a board member of the State and Local Legal Center, headquartered in Washington, D.C. The center extends NACo’s advocacy on behalf of counties to the highest court in the land.