Banks Sued for Predatory Lending

It may be galling to think that those banks involved in subprime lending, which led to massive foreclosures, sharp drops in state tax revenue, a credit freeze and even today’s recession, may ask again for taxpayer-funded handouts, but city and state government leaders aren’t sitting idly by.

Ticked off officials trying to get compensation for homeowners and communities have filed a string of lawsuits against lenders involved in the subprime lending frenzy of the last few years.

• The Memphis City Council and Shelby County Board of Commissioners are considering a class-action lawsuit against alleged predatory lenders who participated in what’s being called “reverse redlining.” Reverse redlining offers only high-cost loans to targeted minority neighborhoods. The practice is illegal.t
• The city of Baltimore is involved in a similar effort and filed a federal lawsuit last month against Wells Fargo Bank. The city claims that the bank’s practices resulted in bad loans and mass foreclosures.
• The city of Birmingham, Alabama, has filed a lawsuit against Wells Fargo, Regions Bank and Countrywide Financial. The suit contends that the lenders violated the Fair Housing Act by engaging in predatory lending practices, causing the city to lose tax revenue due to foreclosures and forcing it to spend money to maintain or demolish abandoned properties, deal with increased crime and spend more on police and fire protection.
• Pennsylvania’s Attorney General reached a $150 million settlement with Countrywide for mortgage relief and cash assistance for state residents following an investigation into subprime mortgages sold by the firm. The investigation determined that Countrywide engaged in deceptive and misleading practices, including bait-and-switch tactics and disclosure omissions.
• The city of San Diego filed a lawsuit in October alleging that Washington Mutual (now taken over by JPMorgan Chase) practiced unlawful subprime mortgage lending practices. The city also sued Countrywide Financial earlier last year. The state of California filed a similar suit against Countrywide with 10 other states.
• Similar court cases are popping up around the country, including Cleveland, Texas and Tennessee.
• The NAACP has filed a landmark lawsuit alleging racial discrimination in subprime home mortgage lending against 15 major lenders, including Ameriquest Mortgage Co, Chase Bank USA, Citimortgage, GMAC Mortgage Group, JP Morgan Chase & Co, and SunTrust Mortgage.

If you were the sitting judge in one of these cases, how would you decide the case, and how do you think those bringing the lawsuits should be compensated?

Tags: bank lawsuits, predatory lending, subprime lending

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