Cleveland judge rejects most of Cleveland’s suit against banks over subprime loans

December 10, 2011 By Steve Dibert Leave a Comment

Pat Galbincea, The Plain Dealer

A Cuyahoga County judge has dismissed most of a 2008 public nuisance lawsuit Cleveland officials filed against 21 banks and mortgage companies in an attempt to punish them for bankrolling subprime loans.

The dismissal cuts off another avenue the city sought to collect millions of dollars in damages related to the foreclosure crisis. A similar suit was dismissed in July 2010 by the U.S. Circuit Court of Appeals in Cincinnati.

The lawsuit languished on Cuyahoga County Common Pleas Judge Brian J. Corrigan’s docket for more than a year with no action taken until a Plain Dealer editor inquired about it on Nov. 15.

On Nov. 22, Corrigan dismissed the city’s charges that bank mortgage lending practices created a public nuisance, and that the banks violated the Ohio RICO Act which city lawyers say “by knowingly instituting foreclosure proceedings with documents falsely claiming titles to the underlying mortgages, constituting a pattern of corrupt activity.”

In May 2009, U.S. District Judge Sara Lioi ruled that Cleveland could not make a nuisance claim because it had no authority to regulate mortgage lending or prove direct relationship between the city’s damages and the bank’s activities.

Corrigan wrote that too many other factors like urban decline, proper foreclosure actions and increased crime rate also contributed to the city’s lost tax revenues and increased expenditures.

That also was similar to Lioi’s ruling, when she said the city could not prove banks were directly responsible for blight, crime and other problems foreclosures had caused in Cleveland.

Read more here