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City of Miami predatory lending suit against big banks revived

In the years since the housing bubble burst in the U.S., leading to thousands of Florida residents losing their homes to foreclosure, many people have been searching for who was responsible. Some people say the system was simply rigged against average homeowners, but others, including the City of Miami, blame banks for encouraging people to sign up for predatory loans like adjustable-rate mortgages.

The city went so far as to sue three of the big banks: Bank of America, Citigroup and Wells Fargo. Miami sued under the federal Fair Housing Act, on the theory that the banks targeted minorities with risky mortgages that featured higher fees and costs. White customers in similar circumstances were offered better mortgages, the lawsuit alleges.

The banks got the lawsuit dismissed in federal court, but a recent appellate decision has revived it. As Daily Report discusses in an article from early September, the U.S. Court of Appeals for the Eleventh Circuit reversed that decision.

The banks argued that Miami had failed to allege a strong enough connection between their conduct and harm suffered by the city. The appellate panel of judges rejected that argument. They acknowledged that "confounding variables" contributed to the housing crisis. But they added that, if Miami's allegations are true, the banks perpetuated a discriminatory lending scheme that led to "a higher rate of foreclosure on minority-owned property and thereby reducing the city's tax base."

This is not a verdict. It merely means that the case will return to trial, unless the banks appeal. But it presents an interesting legal response to South Florida's continuing foreclosure crisis.

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