As voters go to the polls on Tuesday, the U.S. Supreme Court will be revisiting the 2008 collapse of the housing market, and the resulting drop in property values and property tax revenue. At issue are two cases testing whether Miami can sue Wells Fargo and Bank of America under the Fair Housing Act for alleged racial discrimination in mortgage terms and foreclosures.
Demonstrators in Philadelphia in 2008 try to draw attention to the subprime mortgage crisis. Philadelphia is one of the cities backing Miami's efforts to sue Wells Fargo and Bank of America.
Specifically, the city of Miami alleges that the banks discriminated against black and Latino homeowners in terms and fees.
That made mortgages more expensive than they otherwise would have been, and when these homeowners ran into trouble, the suit says, the banks refused to refinance mortgages on terms equal to those offered to white borrowers in similar economic circumstances.
It is a novel lawsuit, brought not by individual homeowners but by the city of Miami, which was among the hardest hit in the housing foreclosure crisis. Supported by two dozen other cities, Miami contends that local governments are in the best position to enforce the statute against large lending institutions that discriminate against certain borrowers.
The city claims that the banks' foreclosures were racially imbalanced and unnecessary. They also say the foreclosures resulted in a dramatic drop in property values, which in turn resulted in a dramatic drop in property tax revenue at the very time the city needed to spend more to deal with the resulting urban blight.
A federal appeals court based in Atlanta ruled in favor of the city, allowing it the chance to prove its claims at trial. The banks appealed to the Supreme Court, contending that Congress never authorized such suits under the Fair Housing Act and that Miami has failed to show it suffered directly from the discriminatory lending practices it alleges.