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LA Unified is appealing a decision that threw out its lawsuits against three major banks it had accused of racially biased mortgage lending, according to Reuters. The district argues that the lending practices led to foreclosures in the Los Angeles area and a reduction in tax revenue for the district.
Last month, U.S. District Judge Otis Wright threw out the lawsuits essentially on a technicality and ruled in favor of the banks’ legal arguments that local property taxes do not determine the school district’s level of funding because state and local revenue are combined into one fund under state control.
David Holmquist, general counsel for LA Unified, did not respond to a message seeking comment.
The lawsuits were filed in September and are similar to two brought against Wells Fargo and Citigroup by the city of Los Angeles, which are ongoing. Earlier this month, the city moved its case from federal court to state court even though a jury trial had been scheduled for November.
LA Unified argued in its lawsuits that the banks had violated the Fair Housing Act of 1968 by using “redlining” in how it lent money in the district. The suit accused the banks of both traditional redlining and reverse redlining. Traditional redlining refers to denying loans or credit based on an applicant’s race, while reverse redlining refers to steering minorities into predatory loans they will likely not be able to afford.
According to the district, the banks then sold the subprime loans off in mortgage-backed securities to government-sponsored entities Fannie Mae and Freddie Mac or to private investors, contributing to the housing crisis of 2008 and subsequent recession.
The complaint also stated that neighborhoods of color in the LA Unified district were flooded in the past decade with predatory loans by the banks, which in effect led to property tax revenue losses estimated to be $481 million.
Wells Fargo has already settled a number of lawsuits around the country where it was accused of redlining, including a $175 million suit brought by the federal government.