Cleveland sues lender in wake of subprime crisis
As one of the worst hit cities by the subprime lending and foreclosure crisis, Cleveland, Ohio, a large US city is suing lenders in a method to make them repay damage caused to the city.
As a way of getting back what they have lost, the City of Cleveland, Ohio, in the US is suing some 21banks claiming that the lending practices that those banks use are causing public nuisances throughout the city.
The subprime lending practices of these banks, the suit claims, have lead to reduced property values and a decrease in the city's ability to collect taxes on properties.
The city itself is at the heart of the subprime lending crisis and is considered one of the highest foreclosure rated cities in the country. Coupling this fact is that the city has lost a substantial amount of its manufacturing plants to overseas markets or consolidations within the companies.
The lawsuit seeks hundreds of millions of dollars from the banks. This includes compensation for lost taxes, the revaluing of property values as well as money spent demolishing and boarding up abandoned homes throughout the city. The lawsuit is filed under Ohio's state law that prohibits public nuisances.
Mayor Frank Jackson announced the lawsuit in a news conference held. He said, "We have to hold accountable those who are responsible." In his comments he claimed that the practices used by these lenders was similar to drug dealers in that the only motive is profit. Additional costs placed on the city in terms of increase police and fire protection and expenses related to maintaining these properties have hurt the city considerably.
The US Conference of Mayors issued a report in November outlining the risks and costs faced by cities due to the foreclosure crisis. It claimed that the 361 metropolitan areas throughout the country would be hurt by $166 billion in economic downturn.
Cleveland is not the only city weighing legal options. Other Midwestern cities are considering similar options. Cleveland stands to see 8,000 foreclosures during the course of 2008. Cleveland is one of the poorest cities in the country due to the loss of jobs.