LOS ANGELES (CBS) — The city of Los Angeles is suing US Bank, the fifth largest bank in the country, accusing it of being a slumlord for homes in South LA and the San Fernando Valley.
A lawsuit filed Monday afternoon accuses US Bank of failing to properly maintain properties the bank acquired during the past four years and allowing nuisance conditions to develop, according to a statement from City Attorney Carmen Trutanich’s office.
US Bank acquired more than 1,500 properties in the city of Los Angeles through foreclosure during the housing boom and subsequent bust. Many of those homes were vacant, and US Bank was accused of allowing many of those homes, in the South Los Angeles and northeast San Fernando Valley, to fall into disrepair, depressing property values and leading to increased crime rates.
US Bank was also accused of engaging in deceptive and dishonest tactics to evict tenants, provide minimum maintenance at occupied buildings and forcing tenants to live in substandard and dangerous conditions.
The city attorney claims US Bank tried to evict tenants by serving notices requiring unreasonable demands, demanding tenants leave in an extremely short time for small amounts of money, causing or allowing utilities to be shut off and threatening legal action.
The lawsuit seeks immediate injunctive relief, including an inventory and inspection of foreclosed properties, compliance with code requirements and a stop to all illegal evictions.
In response to the lawsuit, US Bank issued this statement:
“U.S. Bank cares about the City of Los Angeles. We’re lending in Los Angeles. We’re hiring in Los Angeles. We’re giving money to charities in Los Angeles. We’re on nonprofit boards in Los Angeles. We’re investing hundreds of millions of dollars to support affordable housing, education and economic development in Los Angeles.
We are extremely disappointed that the City Attorney’s office has chosen to file this lawsuit. The city attorney has chosen the wrong party – we are not the owners of the properties, nor are we responsible for the servicing of the properties. The homes are owned by trusts, consisting of investors, and are serviced by other companies. Those companies are responsible for maintenance of the properties and compliance with city ordinances. Our role as trustee is purely administrative.
We have had extensive discussions with the City Attorney’s staff in an effort to identify and resolve any issues.
We have made multiple requests of the City over the past couple of years to obtain detailed information on properties they considered to be in disrepair in order to immediately identify and work with the responsible servicer to address outstanding issues. Until very recently, the City has refused to provide us with that information.
We believe that each of the properties identified in the complaint are part of residential mortgage-backed securities trusts where mortgages originated by other lenders were packaged into securities and sold to investors.
The only reason U.S. Bank’s name is associated with these properties is because we serve as trustee for the trusts. Foreclosure actions are taken by the servicers on behalf of the trusts and merely in the name of the trustee.
Only the servicer of the home – the company the homeowner sends their mortgage payment to each month – can foreclose or initiate a mortgage modification. In addition, the servicer is responsible for the upkeep of homes and properties and for interacting with homeowners and/or tenants.
Our role as trustee is to hold title to the assets on behalf of the trusts and for the benefit of the investors in the mortgage-backed security, and perform certain other administrative duties for the trust. The city attorney refers to the compensation we receive as trustee, but the level of compensation reflects the fact that our duties as trustee are limited and that servicers have additional duties for which they are compensated.
Because it is the servicers, not the trustee, who have the duty to maintain foreclosed properties, we intend to bring them into this lawsuit.
It is clear from the complaint that the city does not understand our role with respect to mortgage-backed securities. For example, contrary to the claims made by the city attorney in the complaint, we did not purchase and then bundle residential mortgage loans into securities.
Like the City Attorney, we are troubled by properties that are not maintained, which have a corrosive impact on neighborhoods and communities.
As trustee, U.S. Bank has limited (if any) information on the loans or status of properties in the trusts.
We have worked collaboratively with other cities to engage servicers to address property-specific and general foreclosure related concerns. We have made similar offers to the City Attorney’s office, and we continue to stand ready to implement such an approach with the city of Los Angeles.”