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Miami Sued Chase for Discriminatory Lending

The City of Miami sued Chase for discriminatory lending practices resulting in unusually high foreclosure rates for minority neighborhoods.

According to Reuters.com, the lawsuit claims that “Loans in predominantly minority neighborhoods in Miami were about 4.6 times more likely to result in foreclosure than loans in neighborhoods with a majority of white residents.”

Why Miami Sued Chase for Discriminatory Lending

The Fair Housing Act makes discriminatory mortgages illegal. The protection as defined by the Housing and Urban Development’s website is as follows:

In Mortgage Lending: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap (disability):

  • Refuse to make a mortgage loan
  • Refuse to provide information regarding loans
  • Impose different terms or conditions on a loan, such as different interest rates, points, or fees
  • Discriminate in appraising property
  • Refuse to purchase a loan or
  • Set different terms or conditions for purchasing a loan.

The Basis of the Lawsuit

The lawsuit claims JP Morgan Chase & Co. extended high-risk and high-cost loans in disproportionate numbers to minority neighborhoods. When homeowners defaulted on those loans, the opportunity to negotiate new terms were not afforded to Hispanic and black neighborhoods in Miami as they were to white neighborhoods.

Miami claims damages from lost revenue incurred because of non-payment of taxes on these foreclosed properties as well as the cost of provided additional services to the neighborhoods involved.

Other Cities File Similar Lawsuits

Miami is not the only city seeking damages and JP Morgan Chase is not the only bank accused of these practices. Los Angeles filed similar lawsuits against Bank of America, Wells Fargo and Citigroup.

Both Los Angeles and Miami are seeking damages due to loss of tax revenue and the cost of extending more services to the neighborhoods suffering from the high foreclosure rates. When families experience foreclosure or fear foreclosure, abandoned houses fall into disrepair and may become a target from squatters who would seek to take up residence.

The neighborhoods impacted by these foreclosures require additional services such as police and fire. Taxes that normally pay for such services remain unpaid due to the abandonment of the property.

Terminology Related to Discriminatory Lending

Redlining and Reverse Redlining

Redlining is the illegal practice that makes it difficult or impossible for certain inner-city neighborhoods to get mortgage loans. According to Investopedia.com, the term comes from the old practice of drawing a red line around an excluded neighborhood on a map.

Redlined neighborhoods had their loans denied or the criteria to qualify for loans were almost impossible to meet..

Reverse Redlining occurs when, instead of denying loans to a particular neighborhood, these neighborhoods are targeted for predatory loans.

Predatory lending is the practice of preying on individuals with potentially low income or low credit scores, offering them loans that are unethical packed with fees, mandatory insurance or other add-ons, and unreasonable prepayment penalties which prevent borrowers from refinancing at lower rates in the future.

Establishment of the Community Reinvestment Act (CRA) of 1977 was intended to prevent the discriminatory practice of redlining.

Schedule a legal consultation with Eric Lanigan of Lanigan and Lanigan, P.L. in Winter Park, Florida. An attorney can understand what has transpired and what legal remedies may be available to a potential client. 

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