June 18, 2018

A California federal judge ruled Friday that Oakland can proceed with trimmed allegations that Wells Fargo steered minorities to pricey subprime loans that increased foreclosure rates, saying the city’s bid to sue over reduced property taxes passes muster under the U.S. Supreme Court’s Bank of America v. Miami decision.

 U.S. District Judge Edward M. Chen refused to dismiss all of Oakland’s claims, saying some of the harms alleged by the city were, at least at the pleading stage, sufficiently connected to Wells Fargo NA’s alleged wrongdoing to satisfy the standard set out in the 2017 Bank of America decision. That high court ruling dealt with similar allegations and found that municipalities can sue banks under the federal Fair Housing Act for lost tax revenue on foreclosed properties directly caused by discriminatory lending practices.

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 Oakland first filed suit in September 2015, claiming that Wells Fargo violated the federal Fair Housing Act and the California Fair Employment and Housing Act by steering black and Hispanic borrowers to predatory home loans more often than white borrowers, leading to defaults and foreclosures that prevented the city from raising necessary tax revenues. The city said that black borrowers were nearly 2.6 times more likely to get high-cost, high-risk loans than whites, and Hispanic borrowers were 3.3 times more likely to take those loans than whites.

The city amended its complaint in September 2017 in the wake of the Bank of America decision, arguing that the predatory loans not only depleted the city’s coffers, but also increased spending on battling blight and neutralized spending on fair-housing programs.

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 The City of Oakland is represented by Barbara J. Parker of the city’s attorney's office, Joel K. Liberson of Trial & Appellate Resources PC, Joseph M. Sellers of Cohen Milstein Sellers & Toll PLLC, Robert S. Peck of Center for Constitutional Litigation PC, and Yosef Peretz of Peretz & Associates.