Cities and Neighborhoods Catch a Break in Beating Banks

New Orleans   In a rare surprise over the dozen years that conservative US Supreme Court Chief Justice John Roberts has run the nation’s highest court, he joined the four more liberal justices on an issue, delivering a 5-3 vote. Even more shocking the decision was a slap in the face to big banks, in this case Bank of America and Wells Fargo, on a complaint brought by the City of Miami. The court ruled that Miami had standing to sue and to further pursue its claims concerning the discriminatory lending practices of these banks and their allegation that such practices led to decreased property values in neighborhoods, and therefore reduced property tax revenue to the city as well as increasing blight in the community.

This is big, really big, because it powerfully opens the door to a broader interpretation of the Fair Housing Act and its prohibitions against racial discrimination in preventing different standards between one neighborhood and another in cases like redlining, but it also speaks to differing and discriminatory standards in mortgage lending because of income as well, which was at the heart of broker driven exploitation that fueled abuse and outright fraud in the subprime market. There can’t really be too much doubt that Bank of America and Wells Fargo didn’t pause to even take a breath in lower income neighborhoods as they altered their supervision and standards willy-nilly to drive volume on refinancing as well as new purchases much as often as new purchases. Wells Fargo has already become poster child for not supervising its sales staff, but neither does the record of Bank of America and Wells improve when examining the way that they mishandled mortgages underwater during the Great Recession, exacerbating foreclosures.

There’s settled evidence that property values decrease when homes are abandoned in communities, and foreclosures in Miami and other cities led to increased abandonment. The scandalous disregard that big banks showed in refusing to modify the mortgage terms to prevent foreclosures as well as paying little attention to managing and maintaining the properties where they were foreclosing directly lowered values in those properties and whole neighborhoods. Miami has the lead role in proving this now that the Supreme Court has sent the case back down to Atlanta and the 11th Circuit Court of Appeals, and clearly the odds are still stacked against the city and favor the banks, but the door is open and common knowledge and a drive-by to any lower income community establishes the facts on the ground.

The banks are hoping they can prove that they were just one of many crooks, and not the ones pulling the trigger to rob the neighborhoods of their value. In criminal courts this might be a case where the banks might not get a sentence for murder, but they would definitely do time for manslaughter, because there is no doubt that they hurt these communities and the people who live there, whether they were driving the getaway car, acting as the lookout, or holding the gun.

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Bad Boy Banks Running Wild While Creating Credit Desert

New Orleans  Rather than learning something about proper corporate behavior in the banking meltdown they triggered with their housing securitization schemes and unwillingness to supervise mortgage brokers, the gazillion dollar bailout seems to have taught the banking establishment that they could act in all ways with impunity. As we move towards the ten year mark of this national and community disaster, there are too many examples that come readily to mind.

One of the most disturbing is the way banks are now flaunting the Community Reinvestment Act of 1975 by creating a credit desert in lower income and minority neighborhoods. We are now reading regularly about complaints being filed against banks for outright racial discrimination.

The giant Wells Fargo was finally called to account in a rare exercise by the Office of the Controller of the Currency of its authority in reviewing the annual CRA records of all regulated lending institutions. Wells Fargo was given a “needs to improve,” and given the watered down nature of the CRA now, a bank really has to mess up to get such a negative rating by the OCC. The CEO said he was disappointed, but to quote one banking newsletter:

10 government inquiries over the past decade prompted the OCC to lower its overall score of the company’s compliance with community banking laws to “needs to improve.” Enforcement cases cited by the OCC faulted the bank’s treatment of minority neighborhoods, military personnel and women who had recently given birth. “Bank management instituted policies, procedures and performance standards that contributed to the violations for which evidence has been identified,” the OCC wrote in a report. Abuses occurred in “multiple lines of business,” the regulator said.

This will hurt Wells Fargo because it is a critique of the pervasive and arrogant culture of the bank. Whether it will get them to modify their behavior is uncertain.

Another case in point with another giant based North Carolina this time rather than based in California, found a bankruptcy judge administering a beat down to the Bank of America for its thuggish handling of a foreclosure in California.

A bankruptcy judge in California fined Bank of America $45 million over the bank’s mistaken foreclosure on a family’s home and mishandling of the loan modification process on their mortgage calling it “brazen” and “heartless.”

In this case Bank of America’s standard trick of losing the loan mod paperwork was exposed for the duplicity that has been infamous in their handling of modifications and ruthless, and sometimes, incorrect foreclosures.

If this is the way the big letter, top of the list banks are handling loans to lower income and imperiled families across the country, is it any wonder that hedge funds and other financial vultures are swooping into our neighborhoods with one predatory lending instrument after another, feeling confident that they can rob and steal without any consequences, preferring to pay the fines, rather than do right?

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