U.S. Bank being sued by Los Angeles over unkempt properties

U.S. Bank is gaining notoriety in L.A., being recognized as a slumlord that is not taking care of properties they oversee as trustee. Out of the more than 30,000 properties that overturned to foreclosure in the three years spanning from 2007 to 2010, U.S. Bank gained title on 1,500 properties. The Wall Street Journal details, “U.S. Bank acquired titles to more than 1,500 properties in Los Angeles through foreclosure during the past four years, according to the city attorney's office. From January 2007 to September 2010, 36,752 housing properties were foreclosed upon in the city of Los Angeles, according to the Los Angeles Housing Department.”

Now the city is seeking restitution and wants to levy penalties against U.S. Bank, a company that has inappropriately evicted tenants out of properties, has not maintained these properties and does not take any responsibility or feel they share liability for these foreclosed properties. According to Bloomberg, “The city [L.A.] accused the bank of violating California’s unfair competition law and the Los Angeles municipal code. It seeks $2,500 a day for each violation.”

What’s interesting about this case is how the city of Los Angeles is opening up the definition of trustee; since U.S. Bank is overseer of the mortgages as a trustee to mortgage-backed securities, they do not believe they share in any liability of the physical property. However, they are capable of managing and evicting tenants from the property.

The problem with this entire system is the shuffling that occurs between banks. For example, once someone opens up a mortgage loan for a new home purchase they will most likely have to deal with three or more different loan servicers throughout the life of that mortgage because of the amount of turnover that occurs between banks.

As reported in the Wall Street Journal article, “Mr. Mitau said the city provided the bank with a list of 100 properties a few months ago, but more than half of those properties had been sold to other trusts. Only about 40 of the properties still belong to trusts managed by U.S. Bank, officials there said.” The city of Los Angeles won’t stand for irresponsible banks who think they can sell away their liability and not keep up with their business.