NEW YORK/LOS ANGELES (Reuters) - Los Angeles has sued U.S. Bancorp (USB.N), accusing a unit of the fifth-largest U.S. commercial bank of becoming one of the city’s biggest slumlords and blighting the city by allowing hundreds of foreclosed homes to fall into disrepair.
Monday’s civil lawsuit by the office of Los Angeles City Attorney Carmen Trutanich alleges that U.S. Bank NA has taken title to more than 1,500 foreclosed residential properties in the city in its role as trustee for various mortgage-backed securities trusts.
“This lawsuit is a deterrent. It’s a message to other banks; step up and do the right thing,” Trutanich told reporters on Tuesday on the steps of Los Angeles City Hall.
Asked if the city would sue other banks, Trutanich said “that is one of the arrows in the quiver,” but did not name any potential targets.
In its complaint, Los Angeles said that at least since July 2008, U.S. Bank has “disregarded virtually every one of its legal duties and responsibilities as owner, resulting in the creation and maintenance of an alarming number of vacant nuisance properties and substandard occupied housing units.”
It said the bank ignored repeated demands that it comply with the law, causing hundreds of homes to become uninhabitable or “public nuisances” and resulting in illegal evictions of hundreds of tenants from the second most-populous U.S. city.
Los Angeles said it is seeking a civil fine of $2,500 a day for each violation by what it called “one of the largest slumlords in the city.” It estimated potential liability in the “hundreds of millions of dollars.”
Thomas Joyce, a spokesman for Minneapolis-based U.S. Bancorp, said it is the mortgage servicers, not the trustee, who have the responsibility to maintain foreclosed properties and that “we intend to bring them into” the lawsuit.
Joyce also said the city only recently agreed to detail which homes needed better upkeep and that the bank will “stand ready” to address property-specific and general foreclosure concerns as it has done in other cities.
Trutanich said U.S. Bancorp remains responsible.
“When you own a piece of property, you’re at the top of the food chain and you can try to deflect and say someone else is responsible, but you’re the owner,” he said.
The case against US Bancorp follows a May 2011 lawsuit in which Trutanich’s office accused Germany’s Deutsche Bank AG (DBKGn.DE) of letting its real estate properties deteriorate into slum conditions.
Other large U.S. cities have also sued over mortgage industry practices they allege contributed to urban blight.
Wells Fargo & Co (WFC.N), the nation’s largest mortgage lender, settled a lawsuit in May by Memphis, Tennessee, and on July 12, it settled a similar case involving Baltimore.
The Baltimore accord was reached in connection with the San Francisco-based bank’s $175 million settlement with the federal government over allegations it overcharged black and Hispanic borrowers on mortgages, contributing to higher foreclosures.
Wells Fargo was one of five big servicers to join February’s $25 billion U.S. settlement over foreclosure abuses.
The National Fair Housing Alliance filed discrimination complaints with the federal government in April against both U.S. Bancorp and Wells Fargo, accusing them of doing a better job maintaining foreclosed homes in white neighborhoods than in minority neighborhoods.
According to the 2010 census, Los Angeles had 1.41 million housing units, of which about 95,000 were vacant. The city’s population was about 3.79 million.
U.S. Bancorp shares were up 11 cents at $32.89 in afternoon trading on the New York Stock Exchange.
The case is People v. U.S. Bank NA et al, Superior Court of California, Los Angeles County, No. BC488436.
Reporting By Jonathan Stempel in New York and Alex Dobuzinskis in Los Angeles; editing by Andre Grenon