Los Angeles Drops Discrimination Lawsuit Against Citigroup

By Dena Aubin

NEW YORK (Reuters) -- Los Angeles has dropped a lawsuit accusing Citigroup of discriminatory mortgage lending, marking the second time a major bank has escaped claims that it steered the city's minorities into high-cost loans and led to foreclosures and neighborhood blight.

In a court filing on Wednesday, Los Angeles and the bank agreed to dismiss the case but did not indicate the reasons. Los Angeles dropped a similar lawsuit against JPMorgan Chase last month. It still has cases pending against Bank of America and Wells Fargo in a federal appeals court.

The lawsuit said Citi engaged in "red lining," or restricting credit in minority neighborhoods, and "reverse red lining," or targeting minorities for high-cost loans that ended in default.

Citigroup spokesman Mark Rodgers said the bank was pleased to put the matter behind it. A spokesman for Los Angeles did not immediately respond to a request for comment.

Cities and counties have filed over a dozen discrimination lawsuits against banks since 2012 trying to recover damages caused by the 2007 foreclosure crisis. The lawsuits, which allege violations of the U.S. Fair Housing Act, seek reimbursement for lost tax revenues and increased spending in neighborhoods with abandoned homes.

The suits have had mixed success, although Miami scored a victory last month when a federal appeals court affirmed its right to sue Citi, Wells Fargo & Co and Bank of America under the housing act.

Banks have disputed claims that they discriminated or that their lending practices caused foreclosures.

Filed in 2013, the lawsuit against Citi accused it of engaging in "a continuous pattern" of mortgage discrimination since at least 2004 by imposing harsher terms on minority borrowers.

In court filings, lawyers for Citi had argued that the purpose of the FHA was to provide for fair housing and that Los Angeles's claims were only marginally related to that purpose.

U.S. District Judge Otis Wright last year denied Citi's motion to dismiss the lawsuit.

A similar lawsuit brought by the state of California against Citi is pending, lawyers for both sides said in Wednesday's filing.

(Reporting By Dena Aubin; Editing by Noeleen Walder and Cynthia Osterman)