Officials charge world’s fourth-largest bank with letting foreclosed properties lapse into disrepair. Bank officials say loan servicers are to blame.
The Los Angeles city attorney’s office filed a civil lawsuit Wednesday against the world’s fourth-largest bank, seeking hundreds of millions of dollars in penalties and restitution and an injunction forcing it to clean up its foreclosed properties in Los Angeles.
The Frankfurt, Germany-based bank has foreclosed on more than 2,000 homes over the last four years in neighborhoods across the city, according to the suit — many concentrated in the northeast San Fernando Valley, northeast Los Angeles and South Los Angeles.
Los Angeles officials say the bank has been a dreadful landlord and neighbor. Prosecutors say that during a yearlong investigation, they found evidence that Deutsche Bank had illegally evicted some tenants, let others live in squalor and allowed hundreds of unoccupied properties to turn into graffiti-scarred dens for squatters, gang members and other criminals.
Police records show scores of alleged crimes committed on the properties, including vagrancy, possession of drugs for sale and assault with a deadly weapon. In December 2007, police found a dead body at a Deutsche-owned house on West 55th Street. In 2008, they discovered prostitution at a house on Evers Avenue.
Many Deutsche Bank properties have also wound up in a slum housing database, in which tenants pay rent into an escrow program while the city tries to get the properties fixed up.
“This particular bank is … helping to destroy communities,” said Councilman Dennis Zine, one of six members of the Los Angeles City Council who joined City Atty. Carmen Trutanich at a news conference in which they excoriated Deutsche Bank and other banks that have foreclosed on properties in Los Angeles.
Trutanich said he wants the suit to send “a strong message to other banks” that the city might come after them too. Officials said they may soon take action against HSBC, the UC San Diego. “This is a different angle. This is really focused on the problems that come up when the lenders end up owning the properties…. The problem is when a lender takes over a property, they have the interests only of the lender in mind.”
Kathryn Porter, a visiting professor at Harvard Law School, said she believes the city has a case in its contention that it is the responsibility of a property owner to make sure the servicers it hires do their jobs.
If the city is successful, many of the tenants living in substandard conditions could get compensation.
But those who live near run-down Deutsche-owned properties said their neighborhoods have suffered long-term damage.
In South Los Angeles, Richous Jackson lives next door to a Deutsche-owned vacant house on West 83rd Street. The frontyard of the white stucco home is wildly overgrown. The backyard is full of illegally dumped debris.
City records show 96 habitability violations, with dozens of pages of accompanying paperwork.
Jackson, who called the place an eyesore, was more succinct. “The stink is awful,” he said. “What they need to do is bulldoze the whole place.”
