Subprime Lenders Face Lawsuits

Some parts of the nation have suffered significantly higher numbers of foreclosures than others, resulting in real problems for local governments. Now, in addition to the difficulties that have garnered so many headlines during the past few months, some subprime lenders find themselves facing lawsuits, as cities protest the burden that they allege has been placed upon them by unsound, even predatory, lending practices.

USA Today recently ran a report by Associated Press writer Thomas J. Sheeran, and according to that story, Cleveland is one of the most recent cities to file a lawsuit against subprime lenders. "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," wrote Sheeran.

Reuters reported on January 11, 2008, that Cleveland is suing 21 banks, including such well-known industry names as Wells Fargo, Citigroup, Bank of America, and Washington Mutual. Other big names in the lending industry being sued by Cleveland are Goldman Sachs, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, and Ameriquest Mortgage Co. According to the Reuters report, written by Karen Pierog, the mayor of Cleveland gave a statement saying that "the unscrupulous lending practices that are part of the subprime market have devastated Cleveland neighborhoods, which clearly demonstrate a public nuisance." The numbers are amazing, really. In 2002, Pierog wrote, there were "less than 120" foreclosures in the city. In 2007, however, there were "more than 7,500."