After a decade of shelling out loans to any poor fool who would bite and picking up properties like a game of mindless monopoly, the billion-dollar Deutsche Bank empire is in some major doo-doo with the U.S. — and Los Angeles — government.

Just one day after the feds sued Deutsche for approving almost 40,000 loans “in blatant disregard” of whether loaners could pay the money back (our own banks get paid for their negligence; but hell if we let some German scumbags profit off desperate American renters), L.A. City Attorney Carmen Trutanich is hitting the bank with a second lawsuit while it's weak and unpopular.

The L.A. suit goes far beyond loans:

In a 312-page document [Part 1; Part 2], Trutanich cites 166 Los Angeles properties that have suffered, and continue to suffer, from foreclosure and/or slummy conditions under Deutsche's watch. They allegedly attract squatters, graffiti, crime, trash and other unsightlies to the city. (And we can attest to that.)

Of course, the more direct landlords to these stinkholes differ per property. For that reason, Deutsche is denying all responsibility, via the following statement:

“The Los Angeles City Attorney's Office has filed this lawsuit against the wrong party. As we have repeatedly advised the Los Angeles City Attorney's Office, loan servicers, and not Deutsche Bank as trustee, are contractually responsible for both the maintenance of foreclosed properties and any actions taken with respect to tenants of foreclosed properties.”

Deutsche also claims that it has “offered to help the Los Angeles City Attorney's Office contact the loan servicers that are responsible for maintaining the properties in question” for over a year — “but they have refused our help and would not even tell us which properties they were talking about.”

Looks like Trutanich is trying to set another one of his big precedents (re: supergraphic billboard ban, harsh punishment for protesters, street-art crackdown).

This time, it's the question of whether a trustee should be held accountable for the upkeep of its properties. And Trutanich's timing is perfect: Mortgage litigation is so hot right now.

Indeed, the photo evidence throughout the lawsuit is pretty terrible. One Deutsche property at 7603 South Brighton Avenue, circa 2008:

Credit: Los Angeles City Attorney's Office

Credit: Los Angeles City Attorney's Office

L.A. attorney Richard Baum explains that trustees have it good: Without actually owning a property, it becomes their “underlying asset,” yielding a stream of payments. Meanwhile, they never having to deal with renters, plumbing and all that icky street-level stuff.

He says that loan servicers, who act as middlemen between renters and the looming, far-off trustees, are usually the ones sued for foreclosure complications. But Trutanich is taking the blame game a step further, saying — hey, you collect the payments, you should make sure your loan-servicer minions are doing right by the city and its people.

This just in: The City Attorney's official response to Deutsche's response:

“DB's statement is very carefully worded — they emphasize that it is the servicers who are contractually obligated to maintain the properties. Our lawsuit is not based on contract law, it is based on DB's obligations and responsibilities under federal, state and municipal law, both statute and common law, as a property owner. DB holds title to these properties, and is therefore the owner. The owner is ultimately responsible for compliance with the law. Whatever contractual arrangement DB has with its servicers to maintain the properties does not change the fact that DB is the property owner. In fact, from what we can tell from the contracts that we have seen, even under the terms of the contract, DB is responsible for and obligated to terminate servicers who they decide are negligent. Given the rampant code violations at these properties, there is no argument that the servicers were at least negligent, and, in the unlawful eviction cases, deliberately breaking the law.”

What do you think? Should Deutsche be held responsible for the garbage pile way down at the bottom of the chain of command?


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