L.A. City Attorney Calls US Bank 'Slumlord'

July 19, 2012 -- "This case concerns defendant U.S. Bank National Association, a national bank that has become one of the largest slumlords in the City of Los Angeles." So begins a lawsuit brought by the L.A. city attorney's office.

The complaint alleges that U.S. Bank, through foreclosures, has become since 2008 the owner of "thousands of residential properties" in L.A. "which it has completely failed to maintain." The result, it says, is that hundreds of these homes have fallen into disrepair, "causing blight and destabilizing communities."

A city press release says the bank's potential liability is in the "hundreds of millions of dollars."

Tom Joyce, director of corporate public relations for Minneapolis-based U.S. Bancorp (U.S. Bank), says in an email statement to ABC News that the bank, no less than the city attorney, is troubled that properties are not properly maintained and have a corrosive impact on neighborhoods.

He says, however, that the city attorney has chosen the wrong party to sue: U.S. Bank is not the owner of the properties, "nor are we responsible for the servicing" of them.

The homes, says the bank's statement, are owned by trusts and by investors in those trusts. Only the companies to whom homeowners send their mortgage payments are responsible for the homes' upkeep. Says the bank's email: "It is clear from the complaint that the city does not understand our role."

Frank Mateljan, spokesman for the city attorney's office, says he understands U.S. Bank's role just fine.

"They're named on the deed," Mateljan tells ABC News. "Much as the bank would like to blame gardeners and the pool man, it's the bank's responsibility to maintain these properties or to sell them to somebody who can."

A press release from the city attorney's office about the lawsuit says U.S. Bank was notified repeatedly about the substandard condition of the buildings, and that, despite this repeated notice, it failed to respond or to address the problem.

The bank says it entered into extensive discussions with the attorney's staff, and that it made "multiple requests over the past couple of years to obtain detailed information" as to which properties were in disrepair. Only recently, it says, did the city provide it with the information.

Says Mateljan: "We find that funny and disturbing at the same time—a major bank asking, 'Tell us what properties we own and which are in disrepair.' If you're the owner and named on the deed, you have the benefits of being owner and the burden of maintenance."

L.A.'s suit, he says, is very similar to one the city brought last year against Deutsche Bank. These two actions "have lit a fire under both Deutsche Bank and U.S. Bank to get a better inventory of their properties, and do a better job keeping them up to code." The Deutsche Bank case is pending.

Deutsche Bank's position is that the city attorney "has sued the wrong party," for reasons almost identical to those advanced by U.S. Bank.

Mateljan, who calls the suits very novel, says that L.A. is "the first city, or one of the first cities" to bring such an action.

While L.A. appears to be the first city to use the law this way, it is hardly the first to bring pressure on lenders to maintain properties.

The L.A. Times notes that two other southern California cities, Fontana and Ontario, have announced a controversial plan to help residents whose homes are underwater by using eminent domain to seize and restructure mortgages.

Oakland, says the Times, has a program that requires banks to register, inspect and maintain homes in foreclosure.

Cleveland, according to NPR, has gotten lenders to demolish vacant houses by establishing a 'land bank': The bank agrees to assume ownership of a property if the lender pays to knock it down. The Cuyahoga County Land Bank now has some 700 demolitions pending, says the network, with Bank of America, Citibank, Wells Fargo and other lenders committed to paying between $3,500 and $7,500 per house.