The city of Cleveland has sued 21 banks for their involvement in subprime lending, seeking millions of dollars in costs stemming from record foreclosures, a spokesman for Mayor Frank Jackson said today.
The lawsuit, which was filed in Cuyahoga County Common Pleas Court, targets banks that took part in the subprime mortgage market, accusing them of creating a public nuisance.
It alleges that the banks involved bought and sold high-interest rate home loans, leading to widespread defaults that exhausted the city’s tax base and turned entire neighborhoods upside-down.
“To me, this is no different than organized crime or drugs,” Mayor Jackson said in an interview with Cleveland-based paper The Plain Dealer. “It has the same effect as drug activity in neighborhoods. It’s a form of organized crime that happens to be legal in many respects.”
Jackson contends that Cleveland should have been excluded from the housing boom, pointing to the manufacturing downturn and widespread poverty within the city, and the fact that prices remained relatively flat despite jumping elsewhere.
The banks and mortgage lenders involved include Bank of America, Citigroup, Credit Suisse, Deutsche Bank Trust, J.P. Morgan Chase, Merrill Lynch, HSBC, Ameriquest, Washington Mutual, Countrywide Financial, Morgan Stanley, and Well Fargo, according to spokeswoman Andrea Taylor.
According to the city’s approximations, Deutsche Bank led the way with 4,750 foreclosure filings, followed by Wells Fargo with 4,000, Ameriquest with 1,600, and Countrywide with 1,300.
“We are attempting to hold the various people responsible for this mess accountable,” Taylor said.
Taylor noted that the city has lost millions in tax revenues and has incurred higher public safety costs as a result of the foreclosures.
Ohio Attorney General Marc Dann is also considering a state lawsuit against investment banks for their involvement in the mortgage crisis.
Dann noted that he is investigating “some of the very same people” identified in the city’s suit, and said a state filing is months away and probably wouldn’t be submitted as a public-nuisance case.
“There’s clearly been a wrong done, and the source is Wall Street,” Dann said in a phone interview. “I’m glad to have some company on my hunt.”
Cleveland had the 10th-highest foreclosure rate among U.S. metropolitan areas in October, and the state of Ohio had the third-highest total of filings in November, according to research company RealtyTrac.