LA sues Deutsche Bank over slum slide | Business| Economy and finance news from a German perspective | DW | 05.05.2011
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LA sues Deutsche Bank over slum slide

Deutsche Bank has been hit by another lawsuit in the United States. The city of Los Angeles is seeking damages linked to mismanaged property foreclosures, while the US Justice Department sues the bank for mortgage fraud.

A vandalized house

Vandals and squatters often target vacant properties

The city of Los Angeles is suing Deutsche Bank for allegedly violating federal, state, and municipal laws by allowing hundreds of foreclosed homes to become rundown and illegally evicting tenants.

The lawsuit, filed by the office of City Attorney Carmen Trutanich on Wednesday, depicts the German lender as the city's largest slumlord and seeks hundreds of millions of dollars in reimbursement for the city and compensation for hundreds of tenants.

The 312-page complaint focuses on 166 properties and accuses several Deutsche Bank subsidiaries of breaking laws governing housing conditions, including state public nuisance laws and vacant building ordinances. Homes left empty after foreclosure have allegedly led to squatting, graffiti, crime and unsanitary conditions.

"They hurt the most economically vulnerable people in the city," Trutanich said at a press conference. "They failed to make necessary repairs and tenants were condemned to live in substandard conditions."

Deutsche Bank high rise building

Deutsche Bank says it hasn't done anything wrong

Blame game

Deutsche Bank said in an e-mail statement that "the Los Angeles prosecutor has filed a lawsuit against the wrong party," shifting the blame to intermediary companies contracted with managing the seized properties.

"Loan servicers, and not Deutsche Bank as trustee, are contractually responsible for both the maintenance of foreclosed properties and any actions taken with respect to tenants of foreclosed properties."

But Trutanich insisted that Deutsche Bank, as owner of the properties, is ultimately responsible.

The city is seeking a court order that would force Deutsche Bank to clean up the Los Angeles properties and comply with the city's municipal code, which would fine the bank $2,500 per day for each housing violation.

Mortgage fraud

A separate lawsuit filed on Tuesday by the US Justice Department in New York federal district court said that MortgageIT, acquired by Deutsche Bank in January 2007, insured 39,000 home loans with the Federal Housing Administration (FHA) in the decade to 2009.

It said the mortgages were "recklessly" approved by the company in "blatant disregard" of whether the borrowers would be able to make payments on them.

Both the bank and MortgageIT "made substantial profits through (the) resale of these FHA-insured mortgages," many of which later ended up in default, the complaint said.

The Justice Department said Deutsche Bank and its subsidiary MortgageIT "repeatedly lied to be included in a government program to select mortgages for insurance by the government."

Germany's biggest bank has rejected the charges and pledged to mount a vigorous defence.

"The suit is unfounded and we intend to defend ourselves vigorously against this action," a Deutsche Bank spokesman told AFP, declining to comment further.

Author: Sam Edmonds (AFP, dpa, Reuters)
Editor: John Blau

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