Sue the big banks to make them pay for the foreclosure crisis

Nearly a decade later, major banking institutions have recovered from the Great Recession they helped precipitate but many communities and families devastated by it have not. Among the hardest-hit by the foreclosure crisis, the city of Miami and its residents are among them. Miami is now seeking redress through a new lawsuit against the big banks. As ThinkProgress explains:

foreclosure-crisisMiami has filed a lawsuit under the Fair Housing Act, which bans housing discrimination, contending that Bank of America and Wells Fargo engaged in what has been dubbed “reverse redlining” — giving people of color loans on less favorable terms than white people. In court documents, Miami uses a regression analysis to show that black and Hispanic borrowers were much more likely to get a subprime loan than similar white residents. A loan made in a predominantly minority neighborhood, it finds, was nearly six times more likely to result in foreclosure than one made in a white neighborhood.

When the housing market collapsed, the lawsuit contends, those loans went sour faster, and people of color were less likely to be offered affordable refinancing options.

“It created a budgetary crisis for us,” said Francis Suarez, a city commissioner. The city claims that it nearly had to declare bankruptcy, and it was forced to turn to an emergency law so that it could impose a hiring freeze and salary reduction for city employees.

That lawsuit is now pending before the U.S. Supreme Court. If it succeeds, Miami officials have stated their intention to plow any monetary compensation obtained from the lawsuit back into the city and its people. “There’s a variety of ways that our city and our city residents will benefit directly if we win the lawsuit,” a city commissioner noted to ThinkProgress.

Depending on the outcome of the litigation, other municipal governments harmed by the foreclosure crisis may want to consider the same path forward as well. For more information, see “A city’s unique way to make banks pay for the foreclosure crisis,” ThinkProgress (2016).