Cleveland sues lenders over subprime

[RamboLiberal]

Source: CNN

Likening their actions to those of organized crime syndicates, Cleveland's Mayor is suing 21 major banks and mortgage companies for the roles they played in the sub-prime mortgage crisis that devastated many neighborhoods in the city.

The suit, filed in Cuyahoga County Common Pleas Court, alleges that in pushing sub-prime mortgages in Cleveland, the companies created a public nuisance in violation of state law.

City officials hope to recover hundreds of millions of dollars in damages for lost property tax revenue, the cost of demolishing homes left abandoned and the cost of policing neighborhoods devastated by thousands of foreclosures.

Cleveland Mayor Frank Jackson said, "If you look at the end result of organized crime activity on neighborhoods, cities and individual lives, sucking equity out, you see the same thing here."



Read more: http://money.cnn.com/2008/01/11/real_estate/cleveland_lawsuit/?postversion=2008011114

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Good for Jackson! This is something I think Kucinich would've done as well!

[asthmaticeog]

1. Wow, Mayor Jackson doing something about anything?

Never thought I'd see the day. May have to revamp my opinion of the guy...

[flashl]

2. Supreme Court ruling last year may have impact

In a 5-3 ruling in Watters v. Wachovia the SOCTUS ruled that consumers of national banks and their subsidiaries must go to the federal government — not the state — if they feel they are being cheated or have other complaints.

[toopers]

3. And the individuals who signed the loan docs . . .

have no responsibility for their actions.

[flashl]

4. Don’t put all the blame for subprime mortgage crisis on the borrowers

A kind of cynicism pervades discussion of the subprime mortgage problem.

It is getting in the way of thoughtful discussion of what got us into this mess in the first place.

There is an erroneous assumption that inexperienced or first-time homebuyers simply woke up one morning and decided irresponsibly to buy houses knowing they weren’t financially qualified to do so.

...

The truth is much different and more dynamic.

In fact, many people ensnared in these high-cost loans were sought out by aggressive salesmen who expertly made them think this was their golden ticket to homeownership.

Sure, some buyers gamed the system. But mainly these were investors who tried to profit by buying homes when prices were appreciating, then flipping them quickly before markets slipped.

...

Some of these sales, we know now, also involved overzealous mortgage brokers leaning on compliant appraisers to artificially inflate home values to create larger commissions. No one knows how much of the housing bubble was influenced by bogus appraisals boosting home prices to fanciful levels.

...

But that’s just one reason I roll my eyes when uninformed critics of regulation say we should just let the market fix things. After all, they say, foreclosures are a natural market correction, as if human suffering is little more than a math mistake.

Here’s another explanation of how the market worked — or didn’t. Between 2002 and 2004, when interest rates were dropping, there was a bucket of refinancing going on. People vacuumed up as fast as they could interest rates of 5 percent and lower.

This frenzy attracted a horde of new mortgage lenders and brokers who wanted a piece of the action. The market became saturated with lenders, said Kelly Edmiston, a senior economist at the Federal Reserve Bank in Kansas City.

Kansas City - Read Full Text

[toopers]

5. No one was forced to sign a loan document . . .

I took advantage of those low interest rates, but I didn't buy more house than I felt I could afford and I got a 30 year mortgage at below 5%. What the link states is that 1) People did not think for themselves, or 2) People were running a business by flipping homes, or 3) People were very short sighted, or 4) People were gambling with money they didn't have, or 5) a combination of the first 4.

[Orsino]

7. Some people were very nearly forced into it.

When crisis strikes, people have always looked to the loan sharks.

[flashl]

8. You were savvy enough to navigate your real estate transactions

unfortunately, records reveal that many first time homebuyers relied on and were steered into deficient products by mortgage 'professionals'.

Just recently, Countrywide borrowed $51B from the government using as collateral its mortgage portfolio with more than 60% of those mortgages WITHOUT income verification.

If the borrower was at fault for orgination of the loans, who is responsible for the continued use of the same deficient loans as viable monetary transactions?

This is not about borrowers.

[Acadia Blue]

10. Just last week Country wide was still advertising about the

low rate arms! They believed that GW would bale them out just as Reagan baled out the S and L thieves.

They did not check credit well and intentionally were careless because they believed that they could take the money and then we the taxpayers would pick up the loss.

[Orsino]

6. Save some blame for the Administration and Congress...

...who failed to regulate the predatory corporations. Set aside plenty for us ignorant voters and non-voters who let it happen. Save a little bit for the shareholders who demanded every little bit of potential short-term profit. Save some for the executives who award each other huge bonuses for pillaging communities.

Sure, we can blame loan applicants who were just looking for easy money, but they're mixed up with a bunch of desperate people who were just trying to stay afloat. And a whole lot of us should have worked to ensure that no lenders could ever engage in the practices so dangerous to individuals and the economy.

[Acadia Blue]

9. I hope they win this.