Banking and Finance Law Daily Court to decide if Fair Housing Act reaches mortgage lenders
Tuesday, June 28, 2016

Court to decide if Fair Housing Act reaches mortgage lenders

By Richard A. Roth, J.D.

The Supreme Court has agreed to consider whether Miami can use the Fair Housing Act to sue mortgage lenders the city claims engaged in redlining and reverse redlining as part of “a decade-long pattern of discriminatory lending in the residential housing market.” According to the city, Bank of America and Wells Fargo had mortgage lending practices that included refusing to make loans to or refinance loans for minority borrowers on terms similar to those available to white borrowers with comparable credit qualifications and offering minority borrowers loans only on predatory terms. In separate but related opinions, the U.S. Court of Appeals for the Eleventh Circuit determined that the city’s allegations gave it standing to raise Fair Housing Act claims (see City of Miami v. Bank of America Corp. and City of Miami v. Wells Fargo & Co.Banking and Finance Law Daily, Sept. 2, 2015).

According to the city, the banks’ lending practices violated the FHA in two ways. First, they amounted to intentional discrimination against black and Hispanic borrowers. Second, they had a disparate impact on those borrowers, resulting in a disproportionate number of foreclosures on their homes and a disproportionate number of predatory loans in their neighborhoods.

The city also claimed that it had suffered damage. Properties that the banks foreclosed on lost value, and the foreclosures also reduced the value of surrounding properties, the city said. This resulted in reduced property tax revenues. Also, the city said it had to pay higher police, fire protection, and garbage collection costs to deal with problems presented by properties left vacant after foreclosures.

Banks’ claims. The banks’ appeals focus not on the city’s claimed facts but rather on whether the city had demonstrated that it had the right to assert claims under the FHA. The FHA says that suit can be brought be any person aggrieved by a violation. Both banks claim that this means the city must show more than just an injury in fact that would give it standing to sue under Article III of the Constitution.

Wells Fargo also is challenging whether Miami is an “aggrieved person” under the FHA, while Bank of America has asked whether the city could show that its claimed injuries were proximately caused by the described lending practices.

Miami also has raised comparable claims against Citigroup, but that bank is not involved in the present appeal.

The cases are No. 15-1111 and No. 15-1112.

Supreme Court docket. For details about this and other petitions and cases pending before the Supreme Court, please consult this list of selected banking and finance law cases awaiting action in the 2015 term. Issued opinions, granted petitions, pending petitions, and denied petitions are listed separately, along with a summary of the questions presented and the current status of each case.

Attorneys: Neal Kumar Katyal (Hogan Lovells US LLP) for Wells Fargo & Co. and Wells Fargo Bank, N.A, and Bank of America Corp. Robert S. Peck (Center for Constitutional Litigation, P.C.) for City of Miami. Robert A. Long Jr. (Covington & Burling LLP) for amicus curiae American Bankers Association et al. Brent James McIntosh (Sullivan & Cromwell, LLP) for amicus curiae Chamber of Commerce of the United States.

Companies: Bank of America Corp.; Wells Fargo Bank, N.A.; Wells Fargo & Co.

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