JPMorgan Sued by LA Over Lending Practices - Analyst Blog

Legal predicaments continue to haunt JPMorgan Chase & Co. JPM. The bank has been sued by Los Angeles over its discriminatory lending practices.

In the case filed in the U.S. District Court for the Central District of California, Los Angeles is seeking unspecified damages from JPMorgan owing to its engagement in discriminatory mortgage practices since 2004. The banking baron is accused of denying mortgages to the minority borrowers on the same terms as others and also at times of providing them with loans that were beyond their means to repay.

Hence, this led to a rise in foreclosures in Los Angeles during the financial downturn. Further, the increased number of foreclosures lowered Los Angeles' revenue from property taxes and at the same time increased the expenditure for city services on these properties.

Per the report from low-income advocacy groups, the mortgage crisis in Los Angeles caused homeowners to lose nearly $78.8 million in home values following over 200,000 foreclosures from 2008-2012. Moreover, the city lost property tax revenue of roughly $481 million.

Notably, Los Angeles has also sued Wells Fargo & Company WFC, Citigroup Inc. C and Bank of America Corp. BAC on similar charges in Dec 2013. Of these, Well Fargo's plea to dismiss the case was rejected by the U.S. District Judge last week. Deutsche Bank AG had also been previously accused by Los Angeles of letting the foreclosed homes in low-income regions to deteriorate into slum conditions. The case was settled in Jun 2013.

For JPMorgan, the lawsuit is yet another addition to its legal headwinds. The company continues to face several cases and probes regarding its business conduct preceding the financial crisis. Though the bank has resolved many litigation issues in the past one year, increasing legal hassles keep dragging its financials lower.

Currently, JPMorgan carries a Zacks Rank #4 (Sell).

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