California Federal Court Allows City’s Fair Housing Case To Proceed

Posted on May 30th, 2014 in Courts, Mortgages By BuckleySandler

On May 28, the U.S. District Court for the Central District of California held, without addressing the merits, that the City of Los Angeles has standing to pursue Fair Housing Act and restitution claims against a mortgage lender, and that the claims were sufficiently and timely pled.  Los Angeles v. Wells Fargo & Co., No. 13-9007, 2014 WL 2206368 (C.D. Cal. May 28, 2014). The court denied the lender’s motion to dismiss.  The city alleges the lender engaged in predatory lending in minority communities, that the allegedly predatory loans were more likely to result in foreclosure, and that foreclosures allegedly caused by those practices diminished the city’s tax base and increased the costs of providing municipal services. The court found that by identifying specific properties alleged to have caused injury and asserting that regression analysis would support its claims and attenuated theory of causation, the city adequately pled a connection between the injury and the alleged conduct sufficient to support Article III standing. The court further concluded that the city adequately pled statutory standing under the FHA insofar as it alleged that its injuries are separate and distinct from the injuries of borrowers, and were proximately caused by the alleged lending practices. The court also held that the city’s claims were timely under the FHA’s two-year statute of limitations because it alleged broad discriminatory practices that are alleged to continue, no matter how changed over time (e.g., from redlining to reverse redlining).  Notably, the court did not consider whether the city slept on its rights and could have filed sooner notwithstanding the alleged continuing nature of the practices.  Finally, the court found that the city sufficiently pled facts, for purposes of surviving the motion to dismiss, to support claims of disparate treatment and disparate impact under the FHA.

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