Deutsche Bank AG (DBK) was sued by the Los Angeles city attorney for allegedly failing to maintain foreclosed properties and illegally evicting low-income tenants.

The bank has become "one of the major slumlords in the city" by buying more than 2,200 properties through foreclosure and letting vacant buildings fall into disrepair, Los Angeles City Attorney Carmen Trutanich said today at a press conference. The bank also unlawfully evicted tenants in order to sell buildings, he said.

"They hurt the most economically vulnerable people in the city," Trutanich said. "They failed to make necessary repairs and tenants were condemned to live in substandard conditions."

The lawsuit filed in California state court comes a day after the U.S. Justice Department sued the German bank for more than $1 billion, claiming it lied while arranging federal insurance on faulty mortgages. Deutsche Bank’s MortgageIT unit falsely certified that it was examining default risks while qualifying loans for Federal Housing Administration insurance, according to the government.

Renee Calabro, a spokeswoman for the Frankfurt-based bank, said the complaint filed by the Los Angeles City Attorney is “against the wrong party,” according to an e-mailed statement. "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."

Unreasonable and Unfair

Calabro yesterday called the federal government’s lawsuit "unreasonable and unfair" and said the company would fight the litigation.

Deutsche Bank and MortgageIT concealed problem loans through "egregious" violations of federal rules for analyzing the income and creditworthiness of borrowers, the Justice Department said in a complaint filed yesterday in Manhattan federal court. MortgageIT endorsed more than 39,000 loans for FHA insurance after 1999, making them "highly marketable for resale," the U.S. said. Of those, 12,500 defaulted.

Trutanich seeks a court order for Deutsche Bank to clean up the Los Angeles properties and comply with the city’s municipal code, a $2,500 penalty per day for each violation of the city’s code, as well as restitution. The bank could be liable for "hundreds of millions of dollars," the city attorney said today in a statement.

Frank Mateljan, a spokesman for Trutanich, said in an e-mailed statement that the lawsuit was filed on behalf of the people of California. Deutsche Bank, as the owner of the properties, is ultimately responsible for compliance with the law, Mateljan said.

The case is The People v. Deutsche Bank National Trust Co., BC460878, Superior Court of California (Los Angeles).