Why is everyone obsessed with Los Angeles
The dispute between Deutsche Bank and the city of Los Angeles is preoccupying the courts, and now there are signs of an agreement in the legal dispute over neglected houses in L.A. The financial institution and the city have come to an agreement, according to a joint notification submitted to the competent court. Details were initially not known.
In 2011, representatives of the Californian metropolis sued the bank - calling it a "slum lord". The term is used in English to describe landlords who let their apartments and houses deteriorate. The residents wait in vain for repairs, but the rent is being collected vigorously, often in cash, in order to avoid annoying tax payments. The combination of slum and landlord, in German slum and landlord, has now spread to Germany because of the dispute in Los Angeles.
"Myriads of legal violations"
The dispute ignited a few hundred houses in Los Angeles. In the eyes of the city administration, the bank had the houses attached by defaulting debtors neglected and thus contributed to the decline of entire residential areas. The city's lawyers denounced Deutsche Bank as "one of the greatest slum lords in the city of Los Angeles" and also accused the institute of harassing or even illegally evicting the poor residents in order to be able to sell the houses better. This also increased crime.
The complaint stated that the bank, or its subsidiaries Deutsche Bank National Trust Company and Deutsche Bank Trust Company Americas, had "committed myriads of legal violations". The legal dispute only concerned 166 selected cases. In total, the bank is said to have owned more than 2,000 houses in Los Angeles. According to the Bloomberg news agency, the city had sought to have Deutsche Bank clean the affected properties and pay hundreds of millions of dollars in fines.
Californian houses in German hands
Deutsche Bank had always denied the allegations and stressed that it was the wrong addressee of the lawsuit. It only acts as a trustee for investors; the bank has nothing to do with the actual foreclosures and the administration of the seized houses.
Even after the agreement, the question remains why the Frankfurt-based bank owns real estate in California at all. As early as 2002, US President George W. Bush called for more US citizens to be given the opportunity to become homeowners. In the run-up to the financial crisis, more and more Americans had bought a house with borrowed money. The banks even lent money to people without a job, so-called ninja loans (No Income, No Job or Assets). The financial industry pooled many such mortgages and sold them as mortgage-backed securities around the world. German institutes in particular were happy to take part.
Real estate prices began to stagnate in mid-2006 and finally fell dramatically. At the same time, lending rates rose for many homeowners. At that point, because they could no longer afford it, many borrowers stopped paying interest. Others stopped paying back installments because the market price of their home was suddenly lower than the mortgage they had to pay back.
After the crash, institutions like Deutsche Bank and many German Landesbanken suddenly found themselves sitting on mountains of asset-backed securities, the basis of which - mortgages on real estate in the USA - was no longer serviced. For example, after the foreclosure, Deutsche Bank "inherited" many such properties in California. And so, at least in the eyes of the city administration, became "one of the greatest slum lords of Los Angeles".
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