CLEVELAND — The city of Cleveland, an epicenter of the nation's home foreclosure crisis, has sued 21 banks and claimed their subprime lending practices created a public nuisance that hurt property values and city tax collections.
The lawsuit was filed Thursday in Cuyahoga County Common Pleas Court, and seeks to recover hundreds of millions of dollars in damages, including lost taxes from devalued property and money spent demolishing and boarding up thousands of abandoned houses.
Cleveland Mayor Frank Jackson said Friday that the buying and selling of high-interest mortgages by some of the nation's biggest banks had devastated city neighborhoods struggling to recover after the loss of manufacturing jobs.
"We have to hold accountable those who are responsible," Jackson said at a City Hall news conference.
Jackson compared the impact of the mortgage practices to the harm caused by drug dealing and said the motive was the same: profits.
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The mayor said the city has faced skyrocketing foreclosure-related costs, including police and fire protection for abandoned homes, the expense of maintaining the properties and lost taxes.
The foreclosure crisis has been bad news for nearby homeowners and cities across the country because they lead to falling property values and increased crime.
Cleveland is not the first city to sue lenders over recent mortgage troubles. On Tuesday, Baltimore sued Wells Fargo, alleging the bank intentionally sold high-interest mortgages more to blacks than to whites in violation of federal law. The Baltimore suit alleged that Wells Fargo targeted black neighborhoods for high-risk and unfairly priced loans. Spokeswoman Debora Blume said in a statement that the company does not consider race when making loans.
Jackson and city Law Director Robert Triozzi said Cleveland should have been excluded from the frenzy of selling mortgage-backed securities to investors.
Triozzi said the big banks were targeted because of the their practice of pushing subprime mortgages to fuel profitable bond sales.
The city said Cleveland housing prices remained relatively flat amid industrial layoffs as real estate values jumped elsewhere.
The suit claimed that even though these issues were well documented, investment bankers pushed loans to investors at the expense of borrowers.
