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Citigroup loses bid to stop L.A. mortgage bias lawsuit

June 10, 2014, 1:53 PM UTC
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Citigroup Inc. signage is displayed outside of a bank branch in New York, U.S., on Monday, June 20, 2011.
Photograph by Robert Caplin— Bloomberg via Getty Images

The City of Los Angeles can go forward with its mortgage discrimination charges against Citigroup (C) after the bank lost its appeal to dismiss the claims.

Citigroup, one of four banks the city has sued since last year, is accused of a “continuous pattern” of targeting minorities with high-cost home loans, a violation of the U.S. Fair Housing Act. The result is that minorities could not afford their mortgages and lost their homes, draining the tax base in blighted neighborhoods, according to the charges.

“This is not a ruling on the facts in the case, and we continue to believe the suit is without merit,” Mark Rodgers, a spokesman for Citigroup, said. “Citi is proud of its deep commitment to make sure our lending standards are fair to all of our customers.”

The city is seeking damages for lost property taxes and increased municipal services costs because of the resulting foreclosures.

Loans made in minority neighborhoods were 4.8 times more likely to end in foreclosure than those distributed in primarily white areas, resulting in lost property tax revenue of about $481 million, the lawsuit said.

Citigroup tried to get the case dismissed on grounds that Los Angeles did not have sufficient details of harm, but U.S. District Court Judge Otis Wright said lower tax revenue and additional money spent on troubled neighborhoods was enough evidence for the city to bring its case.

A representative for the City of Los Angeles could not be immediately reached for comment.

Judge Wright also rejected Wells Fargo’s (WFC) attempt to dismiss a similar lawsuit last month. The City of Los Angeles also brought mortgage charges against JPMorgan (JPM) and Bank of America (BAC).