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Cleveland sues 21 banks over subprime mess - Cleveland Metro News – The Latest Breaking News, Photos and Stories from The Pla...

Cleveland sues 21 banks over subprime mess

Posted by Henry J. Gomez and target=_blank>Thomas Ott January 11, 2008 05:01AM

Categories: Breaking News, Crime, Impact

What the lawsuit alleges: The firms are accused of creating a public nuisance by making mortgages available to people who had "no realistic means of keeping up with their loan payments." A dozen of the banks also collectively filed thousands of foreclosures in Cuyahoga County over the last four years.

See each bank's foreclosure filings. (pdf)
Cleveland Mayor Frank Jackson took aim at Wall Street on Thursday with a lawsuit against 21 major investment banks that he said have enabled the subprime lending and foreclosure crisis here.

The one-of-a-kind suit, filed in Cuyahoga County Common Pleas Court, accuses venerable institutions such as Deutsche Bank, Goldman Sachs, Merrill Lynch and Wells Fargo of creating a public nuisance.

Jackson contends the companies irresponsibly bought and sold high-interest home loans. The result: widespread defaults that depleted the city's tax base and left entire neighborhoods in ruins.

City officials hope 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.

"To me, this is no different than organized crime or drugs," Jackson said in an interview with Plain Dealer reporters and editors. "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."

A city spokeswoman said the companies, which are based across the country, were not given advance notice of the suit, which was submitted late Thursday and assigned to Judge Peter Corrigan.

Cleveland is the second major U.S. city this week to sue over the ills of subprime loans.

On Tuesday, Baltimore sued Wells Fargo, alleging the bank intentionally sold high-interest mortgages more to blacks than to whites - a violation of federal law.

The Baltimore and Cleveland efforts are believed to be the first attempts by large cities to recover losses blamed on the foreclosure epidemic, which has particularly plagued Ohio.

But Cleveland's suit is even more unique because the city has based its complaints on a state law that relates to public nuisances. The suit also is far more wide-reaching than Baltimore's in that it targets the investment banking side of the industry, which feeds off the mortgage market.

Investment bankers at these companies buy subprime mortgages from lenders, then sell mortgage-backed securities to investors. It is a legal practice, known as securitization, that became increasingly popular during the housing boom earlier this decade.

Jackson and city Law Director Robert Triozzi said Cleveland should have been excluded from the frenzy. They pointed to housing prices that remained relatively flat as real estate values jumped elsewhere, as well as a manufacturing downturn and widespread poverty.

The suit claims that even though these issues were well documented, investment bankers continued to feed loans to hungry investors at the expense of borrowers buried in interest.

"Ultimately, they're responsible," Triozzi said of the investment banks. "They knew the economic conditions in which they were operating here. They decided that didn't matter."

Joshua Cohen, a partner with Cohen Rosenthal & Kramer LLP, will lead a team of outside lawyers assisting the city.

Cohen is perhaps known best for representing Cleveland Browns season ticketholders in a class-action lawsuit that brought a $3 million settlement after Art Modell moved the football team to Baltimore. His Cleveland law firm has five attorneys, setting the stage for a David-versus-Goliath court battle.

"There is no doubt, in terms of the resources, there is going to be somewhat of a disparity - a big disparity," Cohen said. "We're confident in our theory and what we have alleged. We knew exactly what we were taking on."

Maureen Harper, a spokeswoman for the mayor, said the city won't pay outside attorney fees unless a settlement or favorable verdict is reached.

Triozzi acknowledged the lawsuit, with its unique nature and 21 large defendants, could move slowly. He also expects the banks will request the case be moved to federal court.

"I understand fully what we are up against here," the law director said. "We would not be doing this if we did not believe we had a sound legal argument to stand on."

Jackson, asked if long litigation would be worth the city's time and money, replied: "We're in this for the long haul. I trust Director Triozzi will tell me when to hold them or fold them."

Judge Corrigan will have to decide "how far up the food chain" to go in determining responsibility, said Cleveland State University Law professor Kathleen Engel, an expert on mortgage-backed securities. She believes the city can make a case against the investment bankers.

"These loans were defective products," said Engel, co-author of "Turning a Blind Eye: Wall Street Finance of Predatory Lending," an article that appeared last year in the Fordham Law Review. "They were continuing to finance products that they knew were defective and could have devastating consequences for the city of Cleveland."

The suit accuses some companies without pinning them specifically to Cleveland loans. Engel said making the link will be easy because most, if not all, investment banks had some stake in the market.

The suit may draw the interest of national law firms willing to help Cohen, Engel said.

Ohio Attorney General Marc[hgo: cq: ] Dann also is considering a state lawsuit against investment banks. Dann said he is investigating "some of the very same people" identified in the city's suit.

Dann said a state filing is months away and probably wouldn't be submitted as a public-nuisance case. But he commended Jackson and Triozzi's "creative" approach.

"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."

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I can tell everyone here, that many more of these law suits from cities are coming!!!!  I have been talking with a number of lawyers that are now preparing them. 
The services are most likely to be held responsible through their Insurance.  Here is the irony, the same "Forced Placed" insurance they forced upon victims as me, was an "Occurrence Form Policy" and contained within the "Pooling and Servicing Agreements" was the language for the "Service" to provide insurance. 
I can not mention too much more, but the Banks and through their "Servicers' are going to be held responsible to board up, repair, etc homes they foreclosed upon, and as it stands now, some EPA laws are currently being explored for additional insurance coverage from the Banks and Servicers. 
I will say a lot more on this, but this is a real legal trend, and I'm expecting shortly maybe this month or next month, dozens of these suits will be brought!  
Your Welcome Larry Sr, and Larry Jr.  Chris Wyatt thanks for the copy of the policy, and your Buddy at Lloyd's that covered it up!  More litigation to come at you!  A promise is a promise!  I'm keeping mine!
Oh by the way, their is now real talk about Naming both Larry's Jr. and Sr, personally in numerous litigation's!!! 
I'm going to Houston again next month!   Maybe we could have lunch?
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Better take a food tester with you if you have lunch with the Larrys.

I am glad somebody is getting it.  These foreclosures having far reaching
effects.  Wall street has burned each and every person in the U.S.
that they do business with and by forcing other people to have to step
up and pay more taxes to make up for the declining tax base is getting screwed.

It will even get worse as tax payers have new appraisals done when they
figure out their houses are not worth the loan they are paying.  Reducing
their property tax obligations is something I would jump on to get a little
more money in my pocket.

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Your right on DEE, as values fall, fewer will have to support property tax's, that only means higher property taxes! 

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Cleveland sues Wall St.

Anthony Accetta has been pointing the finger at Wall Street for the subprime mess years.  He is a former Assistant United States Attorney in the Eastern District of New York, and a former First Assistant Attorney General in Colorado. He now runs a private private investigations firm.

He says Cleveland’s suit doesn’t go far enough:

“They’ve got the right facts, but the wrong theory,” he said.
“The should be suing for aiding and abetting fraud, not nuisance.”

Click here to read Accetta’s take on the debacle.

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Pop the popcorn...

Marc Dann, Ohio's AG is just beginning to start the show.

I can't wait!!!!!
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“The should be suing for aiding and abetting fraud, not nuisance.”
LOL...the F word.
Good for him.
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Merrill Lynch Gets $6.6 Billion From Kuwait, Mizuho (Update1)
Bloomberg - 1 hour ago
By Edward Evans Jan. 15 (Bloomberg) -- Merrill Lynch & Co., the US bank battered by subprime mortgages losses, raised $6.6 billion by selling preferred shares to a group including the Kuwaiti Investment Authority and Japan's Mizuho Financial Group Inc.
Citi Writes Down $18.1 Billion; Merrill Sells $6.6 Billion Stakes New York Times
Merrill lines up fresh $6.6 billion capital injection MarketWatch - Guardian Unlimited - Reuters - Times Online
all 156 news articles »  MER - MFG - KUW:KINV

ABC News
Citigroup swings to loss on $18.1 bln write-down
MarketWatch - 23 minutes ago
By Greg Morcroft, MarketWatch NEW YORK (MarketWatch) - Citigroup Inc., the nation's largest bank by assets, ended the suspense on Wall Street over how bad its results would be, reporting its first quarterly loss since 1998 and slashing its dividend ...
Citigroup Writes Down $18.1 Billion in Assets, Cut Dividend to 32 ... FOXNews
Citi Cuts Dividend After Posting 4Q Loss The Associated Press
Business Wire (press release) - (subscription) - Forbes
all 115 news articles »  C
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OMG, it's truly true.

They will sell their souls at any cost wont they?

Hurt Americans further?
They are hurting their own children, but the selfish soul-less bastards cannot even see the evil of their ways.

So this is the beginning of other Companies having a Vested interest in the United States/EVENTUAL OWNERSHIP?

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Moneycontrol India :: News :: Taurus AMC-Parsoli to launch Islamic MF :: :: Market Edge :: Taurus Asset Management ,Shariah C...
From the link above.
I think once the economy develops more and Muslims start getting into the mainstream of the economy of this country, I think any of these finance companies or housing finance companies will roll out their own Islamic mortgages.
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Hmmm, Muslims do NOT pay interest on loans. I am up for THAT!
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Citi Bank to be named in new suit in NY!  with a twist!!! I will tell you more after its filed, but it involves insurance, and how banks have collected insurance claims etc,
It should be filed either late tonight or tomorrow.  I'm guessing this maybe the model suit against the Servicers, lenders and investors to show all and tell all.  That will be used across the country!
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The number one Villain
Cleveland sues 21 banks over foreclosures

Cleveland sues 21 banks over foreclosures

Published Jan 19, 2008 11:14 AM

Wells Fargo used to be associated with a song in a mindless musical. For today’s workers, however, the name is becoming symbolic of the economic hurricane of home foreclosures. Now, Wells Fargo and 20 other predatory mega-lenders are the subject of an important lawsuit filed under Ohio’s “public nuisance” law by Cleveland’s African-American mayor, Frank Jackson.

The lenders “were living large off the misery and suffering of people,” Jackson stated at a news conference Jan. 11. “They are going to have to pay for it.” The suit seeks hundreds of millions of dollars in damages.

“They” include some of the biggest world players on the chessboard of finance capital. Wells Fargo is second in the number of foreclosure filings in Cuyahoga County—4,000 in the last four years. But the suit also names the number one villain—Deutsche Bank Trust with 4,750 foreclosure filings—as well as Ameriquest Mortgage, Countrywide Financial, HSBC Holdings, JPMorgan Chase, Washington Mutual, Citigroup, Bank of America, Bear Stearns, Goldman-Sachs and others. Altogether, Cleveland suffered 7,500 foreclosures in 2007, compared to 120 in 2002.

How did these huge firms, none of them based in Northeast Ohio, become the major culprits in a scandal threatening some 20,000 homeowners in the Cleveland area alone? The process is known in financial lingo as securitization. The first loans to be securitized were prime loans. By 2006, however, 80 percent of all subprime loans, valued at well over half a trillion dollars, had become securitized.

What does that mean for working class families trying to keep their homes?

Cleveland State University Law Professor Kathleen Engel, an expert on the legal aspects of predatory lending who believes the mayor’s lawsuit has merit, explained securitization as it impacts borrowers who fall victim to subprime lending schemes:

“Securitization is the financial technology that integrates the market for residential mortgages with the capital markets. In securitization, investment banks take pools of home loans, carve up the cash flows from those receivables, and convert the cash flows into bonds that are secured by the mortgages. The bonds are variously known as residential mortgage-backed securities (RMBS) or asset-backed securities (ABS).

“Securitization goes by the moniker ‘structured finance,’ in part because a securitizer structures the transaction to isolate the loan pool from the original lender. This is accomplished by selling the loan pool to a special purpose vehicle, or SPV, that is owned by, but legally distinct from, the lender. The SPV then resells the loan pool to a second SPV, which is also independent of the lender and takes title to the bundle. The second SPV is typically in the form of a trust.

“The vast majority of subprime loans are now securitized, leading to claims that securitization facilitates predatory [lending]. ... Nonetheless, the entities involved in securitization have resisted addressing such concerns and continue to serve as major conduits for predatory loans.

“The resulting cost to borrowers is substantial.”

Substantial also are the costs to cities, as distressed homeowners default on loans. This erodes a city’s tax base, causing neighborhoods to deteriorate, and explains why city governments are getting involved in this struggle.

One of the groups blasting the banks is the East Side Organizing Project. ESOP President Inez Killingsworth, speaking last March before a congressional hearing, charged that “the banking industry would like you to believe they pulled out of the Cleveland communities because of the economy. Ladies and gentlemen, they pulled out because they could make MORE money vis à vis their subprime affiliates.

“For example, in 2002, Argent Mortgage Company—the wholesale lending arm of ACC Holdings which also owns Ameriquest Mortgage company—had no presence in the city of Cleveland. Since 2003, however, despite only offering a subprime loan product, they have been the largest lender in Cleveland. I would suggest to you that Argent’s surge in Cleveland is the result of years of local banks turning their back on low- to moderate-income, often minority residents.”

Ameriquest and Argent now have 1,600 foreclosure filings against Cuyahoga County residents. Killingsworth explained the cost in human terms. “I can’t walk down any street in my neighborhood without seeing a vacant, often unboarded, home. Many of these homes used to belong to my friends. I remember visiting them not that many years ago to celebrate the holidays or have a cookout during the summer. Today, those fond memories have been replaced by the stark reality that the lending industry ripped off my friends and me.”

Since this testimony was given, months before the subprime meltdown made front-page headlines, things have gotten incredibly worse. Now there is speculation that many cities and states will have to follow Mayor Jackson’s lead and take legal action to prevent financial ruin. In fact, the mayor’s lawsuit followed a series of court rulings in Ohio against some of the same predators. Baltimore had sued Wells Fargo days earlier over the same issue.

While all these efforts are helpful and needed, the crisis calls for more drastic measures. The time is now for an immediate moratorium on all home foreclosures.


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