By Lawrence Hurley
WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday indicated it could allow Miami to pursue lawsuits accusing major banks of predatory mortgage lending to black and Hispanic home buyers resulting in loan defaults that drove down city tax revenues and property values.
The eight justices heard arguments in appeals filed by Bank of America Corp and Wells Fargo & Co challenging a lower court's decision to permit the lawsuits by the Florida city against the banks. The cases were filed under the Fair Housing Act, a federal law outlawing discrimination in housing.
In September 2015, the Atlanta-based 11th U.S. Circuit Court of Appeals overturned a lower court's decision to dismiss such lawsuits by the city against Bank of America, Wells Fargo and Citigroup Inc. Citigroup decided not to appeal to the Supreme Court. If the court splits 4-4, the 11th Circuit ruling would stand and Miami would prevail, but no national precedent would be set.
Based on the questions asked by the justices, it appeared unlikely the banks would gain the five votes needed to win the case outright. But it was possible that a ruling for Miami could allow the lawsuits to move forward while narrowing the scope of the cases and potentially lowering the amount of damages the city could win.
Chief Justice John Roberts seemed most skeptical of the city's lawsuit, at one point questioning whether a loss of property taxes could count as a direct injury that could give rise to a lawsuit. Roberts said the city's alleged injuries are "derivative of the injury to the homeowners who had the subprime mortgages and who suffered the foreclosure and so on."
Fellow conservative Justice Anthony Kennedy, who could cast the key vote to avoid a 4-4 split, seemed somewhat sympathetic to the banks, particularly over the amount of damages they could face.
Liberal Justice Elena Kagan was among those who seemed open to the case moving forward, saying the Fair Housing Act was designed to address harms to communities, not just individuals.
"Who better than the city to recognize that interest and assert it?" Kagan said.
The banks have said a ruling favoring Miami would lead to a surge of similar suits.
The court is due to rule by the end of June.
Miami accused Wells Fargo, Bank of America and Citigroup of steering non-white borrowers into higher-cost loans they often could not afford, even if they had good credit.
The city said the banks' conduct caused Miami to lose property tax revenues, drove down property values and required the city to pay the costs of repairing and maintaining properties that went into foreclosure due to discriminatory lending.
Several U.S. cities, including Los Angeles and Oakland, have launched similar lawsuits.
(Reporting by Lawence Hurley; Editing by Will Dunham)