The city of Los Angeles is suing Minneapolis-based U.S. Bank, accusing a U.S. Bank subsidiary of failing to maintain hundreds of foreclosed homes which have fallen into disrepair and tarnished community property values along the way. U.S. Bank allegedly holds title to more than 1,500 foreclosed homes in Los Angeles.
The litany of accusations the city brought against U.S Bank include ignoring state and city property and zoning laws by allowing homes to deteriorate into crumbling structures with out-of-control weeds and homes covered in trash and graffiti. The city also accused U.S Bank of such neglect that the foreclosed homes are open to squatters, trespassers, and other miscreants.
According to the suit: “U.S. Bank disregarded virtually every one of its legal duties and responsibilities as owner, resulting in the creation and maintenance of an alarming number of vacant nuisance properties and substandard occupied housing units.” As with many foreclosure actions, the city’s suit also accuses U.S. Bank of illegally evicting property tenants by charging excessive rents and harassing and intimidating homeowners.
U.S. Bank countered the accusations by saying that other companies were responsible for servicing the mortgage loans. U.S. Bank is only a trustee for the properties, and is not responsible for the day-to-day management of the individual homes, according to the company. U.S. Bank also denies purchasing and bundling the mortgage loans into securities.
With all foreclosure issues, it is important for banks and mortgage loan servicers to stay on top of current, and ever changing law. As this suit demonstrates, any bank or mortgage loan servicer should be vigilant that any involvement, at any time with a mortgage or foreclosed tenant can lead to potential liability and potential litigation. To prevent negative and expensive results, it is important to have transparent internal documentation of all paperwork relating to mortgages and their respective transfers. It is also becoming increasingly critical to maintain accurate records of any and all communications between banks and homeowners, including phone calls and other verbal communication.