Three metro Atlanta counties claim in a lawsuit that Bank of America and related companies resorted to abusive mortgage lending practices that targeted black and Latino homeowners.
They seek “hundreds of millions of dollars” in damages to offset lost tax revenue and other public costs they claim stemmed from the practices.
The lawsuit, filed in U.S. District Court in Atlanta, is one of several such suits across the nation that counties and cities have filed against major banking companies since the 2007-2009 real estate crash.
Fulton, DeKalb and Cobb counties allege that the bank and its subsidiaries, Countrywide Financial and Merrill Lynch, steered borrowers into high-cost “subprime” mortgages, stripped them of their equity with high fees and interest charges, and drove them into foreclosure. The lawsuit said the actions, some still ongoing, violate the federal Fair Housing Act.
A Bank of America spokesman declined to comment on the lawsuit, but in an emailed statement the bank said there was “no basis” for claims in several similar lawsuits.
“As we have said with regard to multiple similar suits across the country, our record demonstrates there is no basis for the claims. We have a firm commitment and strong track record for fair lending,” the bank said.
“In very similar lawsuits,” Bank of America said, “federal courts have been split regarding whether a municipality can credibly argue the requisite causal connection between the defendant banks’ alleged predatory lending, and the municipalities’ alleged injury. We will continue to vigorously defend against such claims.”
In their lawsuit, the metro Atlanta counties allege that Bank of America and its units are partly responsible for the wave of tens of thousands of foreclosures that rocked metro Atlanta and saddled local governments with huge economic costs, including lost tax revenues due to falling property values and the costs of dealing with vacant homes and higher crime in blighted areas.
In recent years, those and other Georgia counties also have named British bank HSBC, Fannie Mae and Freddie Mac in other lawsuits tied to the wave of foreclosures.
Similar lawsuits have been filed in recent years by various governments across the nation, including Los Angeles, Chicago, Baltimore, Memphis and Miami.
Harris Penn Lowry, the Atlanta firm handling the case on behalf of the metro Atlanta counties, also is involved in a similar $300 million lawsuit that Chicago-area Cook County filed last year against Wells Fargo.
Most of the lawsuits are still pending, or are in appeals.
But in a 2012 settlement with Memphis and Shelby County, Tenn., Wells Fargo agreed to provide more than $400 million in new loans and financial assistance over five years to affected borrowers. Part of the settlement included $3 million to the city and county for economic development.
Some legal experts have said local governments may have a hard time proving that banks, rather than job losses during the Great Recession, were to blame for the massive foreclosures, lost tax revenues and other problems.
The track record for the lawsuits has been “decidedly mixed,” said Cleveland State University law professor Alan Weinstein. Cleveland, for instance, lost a lawsuit against banks alleging that they were responsible for the public nuisance and costs of derelict foreclosed homes, he said.
But he doesn’t blame law firms and local governments for teaming up to hold lenders responsible for the effects after the subprime lending boom went bust.
“These lending practices have resulted in enormous damage,” said Weinstein, adding that banks also “don’t take responsibility for the (foreclosed) properties,” leading to vacant homes and neighborhood blight that attracts crime.
“Someone does have to take the lead,” he said.
