Foreclosures have caused people to consider strategic default, short sales and other less-than-ideal situations to cure their underwater mortgage.
Now, it appears cities and counties are considering suing the banks that created the problem in the first place. At least that’s one option the city of Detroit is considering, according to The Michigan Citizen.
Our Miami foreclosure defense lawyers believe that the problem with foreclosure in Miami and elsewhere has been exacerbated by the unlawful activities of banks. Many foreclosures could have been prevented had bank officials not used robo-signing practices and created false documents to support foreclosures.
Had they actually worked with homeowners in using government-backed programs, rather than try to unlawfully take away people’s homes, communities might be in a different position than they are today. Many Florida communities, which base their budgets on property taxes, have seen those values fall drastically.
According to the news article, Michigan officials are considering imposing an emergency manager to combat its mounting budget deficit. But some believe that suing the banks based on fraudulent lending practices could be an option.
This goes to the issue of the settlement that the majority of state attorneys general are working on with banks. Michigan is one of the states currently negotiating with banks to come to a settlement, which would preclude legal action. It’s unclear whether individual cities and counties would still be able to sue if the state is part of the settlement.
According to the news article, this wouldn’t be the first time a city sues the banks. Others have seen the unlawful activities of banks and how that has affected their communities. Some have tried to show that the reason communities have been devastated with budget deficits is because of the bank-led home foreclosures and the unlawful practices used to accomplish them.
A recent court decision as well as a Federal Reserve Board review may actually favor communities attempting to bring these lawsuits. Evidence has been mounting for years that shows bank fraud and abuse has led to a major hit to community tax bases.
Baltimore and Cleveland have both sued banks. Baltimore officials claimed that Wells Fargo officials pushed high-interest mortgages on black residents. Cleveland officials sued 21 banking institutions hoping to recover millions of lost taxes from properties that have taken a hit in value after thousands of vacant homes have been demolished.
News has continued to pour out suggesting that bank officials were given bonuses and incentives to push high-interest sub-prime loans onto, in particular, minority borrowers. For bank officials, the higher interest loans looked better for investors. For lenders, these loans have caused them undue financial hardship at a time when they needed it least.
Some analysts believe that the Federal Reserve Board rulings as well as guidance from the Department of Justice may be able to help cities and counties take steps to sue the banks for their misdeeds.