Cities Sue Home Lenders

USA Today (05/16/08) P. A15; Leinwand, Donna
Cities such as Cleveland, Baltimore and Buffalo are suing mortgage lenders over the foreclosure crisis, alleging that the financial institutions have committed mortgage fraud or have violated city codes and federal civil rights laws as they attempt to gain control of delinquent properties. The wave of foreclosed homes has pinched the tax base of cities, putting a strain on municipal services such as policing; and the cities hope the lawsuits will enable them to recoup lost revenue and revitalize neighborhoods that are overrun with vacant, condemned and demolished properties. Although Minneapolis won a case in April involving the management of foreclosed homes, Mortgage Bankers Association spokesman John Mechem says the lawsuits could scare lenders out of a market rather than get them to work with cities to keep up the properties. "Lenders simply won't make loans in areas where they perceive a risk of a lawsuit. It's not the best means to help the local housing market," he says.