CLEVELAND (CN) – Cleveland sued a large group of banks and mortgage lenders, saying their loans to unqualified borrowers reversed years of work the city spent improving neighborhoods and has resulted in “entire neighborhoods … abandoned and boarded up, transforming them into eyesores, fire hazards, and easy prey for looters and drug dealers”.
“The epidemic of foreclosures has devalued not only the homes directly affected by surrounding properties as well, deeply depleting Cleveland’s tax base,” states the complaint in Cuyahoga County Court. “The City has also strained to cover the immediate, tangible costs imposed upon it by the crisis, including increased fire and police expenditures associated with vacant properties, demolition costs, and the like. …
“Subprime lending abuses have inflicted this same kind of damage upon cities across the United States. Cleveland’s predicament, however, remains distinctive and unique – and not only because its foreclosure rate surpasses those experienced elsewhere by a significant margin. The City’s economy and housing situation differed significantly from the rest of the country’s at the time subprime lending reached its peak. The disparities made mass foreclosures the only possible outcome of flooding the local market with subprime mortgages, even if doing likewise in other cities created no such apparent risk. …. Forced to clean up the resulting mess, the City has sustained hundreds of millions of dollars in damages, in the manner described above.
“Responsibility for Cleveland’s plight rests principally with subprime’s so-called ‘securitizers’ – investment banking firms from Wall Street and elsewhere that actually provided the cash used to make loans.
The city demands the actual cost of demolitions, punitive damages for public nuisance, and treble damages for “corrupt activities.”
The city is represented by its own legal department, and by Joshua Cohen with Cohen Rosenthal & Kramer.
Here are the defendants: JP Morgan Chase Bank, Ameriquest Mortgage Securities, Argent Mortgage Co., Bank One NA, Bear, Sterns & Co., CitiFinancial, Citigroup Global Markets, Citimortgage, Countrywide Securities Corp., Credit Suisse First Boston, Deutsche Bank National Trust, Deutsche Bank Securities, GMAC Mortgage fka GMAC Mortgage Corp., Goldman Sachs & Co., Household Realty Corp., HSBC Bank (USA), HSBC Mortgage Services, HSBC Securities (USA), LaSalle Bank, Lehman Brothers, Merrill Lynch Pierce Fenner & Smith, Morgan Stanley & Co., Novastar MTG, Residential Capital, Wells Fargo (Minnesota), and Wells Fargo Home Mortgage.