Cook County Record

Friday, December 6, 2019

Judge: Cook County demands Bank of America pay for 'discriminatory lending,' but did county actually lose tax money?

Federal Court

By Jonathan Bilyk | Nov 22, 2019

Bank of america branch
Tony Webster from Minneapolis, Minnesota, United States [CC BY 2.0 (]

A federal judge says Cook County will need to do more to show why Bank of America should be made to pay the county for lost tax revenue amid the foreclosure crisis, when the county didn't actually lose any tax money, despite the bank's alleged discriminatory home mortgage lending practices.

On Nov. 19, U.S. District Judge Elaine E. Bucklo ordered Cook County to file a brief answering precisely how the county can demand Bank of America pay the county damages for “tax-related losses,” when the county’s tax revenues never declined.

The directive comes after Cook County asked Judge Bucklo to reconsider a decision from March 2018, in which Bucklo limited the county’s ability to press its payment demands against Bank of America for the alleged misconduct.

In its motion for reconsideration, the county had pointed a recent decision from the U.S. 11th Circuit Court of Appeals in Atlanta in a similar case brought against Bank of America and others by the city of Miami, Fla., also over alleged discriminatory lending practices.

In that decision, the federal appeals court ruled a Florida federal judge had improperly dismissed Miami’s claims against Bank of America and Wells Fargo.

But Judge Bucklo said Cook County’s case didn’t align neatly with Miami’s.

“Unlike the City of Miami … the County does not allege that its tax revenues, i.e., the taxes it has actually collected over the relevant time period, have declined as a result of defendants’ Fair Housing Act violations,” the judge wrote.  “Indeed, defendants have argued—both in their motion to dismiss the Second Amended Complaint and in subsequent proceedings—that without such losses, the County has suffered no compensable tax injury.”

Cook County and Bank of America have sparred in court since 2014, when the county sued the Charlotte, N.C.-based lender and its subsidiaries, Countrywide and Merrill Lynch, for allegedly violating the federal FHA law. The lawsuit accused Bank of America of making home loans to minorities with rates and terms allegedly more burdensome than loans offered to whites with similar financial history.

The lawsuit was one of several launched by Cook County in the wake of the foreclosure crisis that engulfed the nation amid the Great Recession. Other lenders sued by the county include Wells Fargo and HSBC. Lawsuits against those lenders also remain pending in federal court.

The lawsuits all asserted the banks’ practices amounted to so-called reverse redlining and helped fuel the foreclosure wave, as the loans allegedly “strip equity from minority homeowners,” and then, in turn, left vacant homes scattered throughout the county. That further depressed home values and cost local governments, including the county, potentially billions of dollars in lost property tax revenue, while jacking up county costs to pay for services related to the foreclosures and vacant properties.

The bank, however, asked the judge to dismiss the case, saying the county has yet to prove it actually lost money from the foreclosures.

In March 2018, Judge Bucklo refused to completely dismiss the action, but limited the county’s ability to collect in the case, only to expenses the county may have incurred.

However, in the months since, similar cases have advanced in the courts. Most recently, the 11th Circuit court handed a loss to the lenders, with their decision in the City of Miami case.

Cook County asserted that decision should allow the county to argue its claims for lost tax revenues should be revived.

But Judge Bucklo remained unsure, ordering the county to demonstrate how its situation is comparable to Miami, where the city showed a loss of actual revenue.

The judge noted in the county’s action against Wells Fargo, that lender had also noted the county’s tax revenues from 2003-2018 had “remained stable at approximately $720.4 million per year,” because the county continued to levy the same tax request every year, even though home values throughout the county had allegedly declined.

Under Illinois’ property tax system, homeowners’ property tax bills can increase, even when their property values decline, if a government body, like Cook County, doesn’t decrease its tax levy – or the total amount of property taxes demanded annually – at the same time.

Cook County is represented by Evangelista Worley LLC, of Atlanta, Georgia; Milberg, Tadler, Phillips, Grossman LLP and Milberg LLP, both of New York City; and James D. Montgomery & Associates of Chicago.

Bank of America and its subsidiaries are defended by Goodwin Proctor LLP of Boston and Washington, D.C. and Winston & Strawn of Chicago.

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Organizations in this Story

Winston and Strawn LLPGoodwin Procter LLPMilberg LLPU.S. District Court for the Northern District of IllinoisU.S. Court of Appeals for the Eleventh CircuitEvangelista Worley, LLCJames Montgomery & AssociatesCook CountyBANK OF AMERICA

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