A Chicago federal judge has eliminated several claims from a suit brought by Cook County against banking giant HSBC, for alleged predatory lending, but the judge said the county still made enough plausible allegations, including that HSBC discriminated against minorities, for the suit to survive.
The May 30 ruling was laid down by Judge John Lee, of U.S. District Court for the Northern District of Illinois, in response to HSBC’s motion to dismiss Cook County’s suit.
In 2014, Cook County sued HSBC, a British conglomerate with worldwide operations, alleging the institution’s alleged race-based predatory lending practices contributed to a rash of foreclosures in the late 2000s, which deprived the county of billions in tax revenue, increased demand for governmental services, depressed real estate values and scarred neighborhoods with vacant houses. The county based its action on the U.S. Fair Housing Act.
James D. Montgomery
HSBC argued the county did not show the bank’s conduct caused the county’s injuries, asserting it’s too “speculative” to believe the alleged dubious lending practices would lead to increased foreclosures and urban blight, much less impose additional financial burdens on county government. The bank further denied discriminating against minorities.
However, Judge Lee found there are credible allegations HSBC loaned money to minorities on terms different than those given similarly situated non-minorities.
Lee also refused to dismiss the claim the bank caused the county to lose various real estate recording and transfer fees, through the bank’s allegedly improper use of the Mortgage Electronic Registration System. The system tracks mortgage ownership and servicing rights.
Lee further found basis to believe HSBC directly caused the county to incur the cost of serving eviction notices, instituting foreclosure proceedings and registering and inspecting foreclosed houses.
Lee struck down the county’s contentions HSBC’s practices led to the county paying more in social services to foreclosed homeowners or to a loss in property tax revenue or a diminution in overall real estate values. Further, Lee dismissed the county’s claims HSBC was to blame for urban blight or for the county’s expenses for demolishing vacant houses.
In knocking down these allegations, Lee observed there were a “myriad of possible intervening causes” between HSBC’s actions and these claims.
In the claim that blamed HSBC for reduced property taxes, Lee said: “The harms caused by HSBC to the minority borrowers were direct, while the injury of unpaid taxes to the County was indirect. Indeed, there could be a number of intervening factors that would need to be accounted for. For example, some homeowners may have been behind in paying their real estate taxes, due to financial difficulties, even before the foreclosures.”
Beyond all its other arguments, HSBC tried to toss the whole case by saying a two-year statute of limitations applied. The county’s suit was filed in 2014, so the suit was limited to any mortgages back to 2012, but the suit was largely based on mortgages originated between 2003 and 2007, in HSBC’s view.
Lee was not persuaded. He said there were believable accusations HSBC is continuing to make loans in a “discriminatory manner.”
The next hearing is June 19.
Cook County is represented by: Milberg, Tadler, Phillips & Grossman, of New York City; James D. Montgomery and Associates, of Chicago; and Evangelista Worley, of Atlanta, Ga.
HSBC is defended by the firm of BuckleySandler, which has offices in Chicago and Washington, D.C.
Cook County also filed similar lawsuits against other financial institutions, including Wells Fargo and Bank of America.