A federal judge has thrown out the city of Cleveland’s lawsuit against a number of large banks that the city believes contributed to the crisis in foreclosures.
The city is appealing, according to this Plain Dealer blog post.
According to the judge who dismissed the suit, the “city’s public nuisance complaint was ‘pre-empted’ by a section of Ohio Revised Code that does not allow municipalities to regulate lending,” the Plain Dealer wrote. The judge “also wrote that the city failed to demonstrate an unreasonable interference with a public right and that the city did not prove that the banks named in the suit caused the damages.”
The suit was filed last January.
“Cleveland’s suit was seen as unique because the city based its complaints on the state’s public nuisance law. And rather than targeting the direct mortgage brokers, the suit targeted the investment banking side of the industry, which feeds off the mortgage market,” the PD explained.
“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. City officials had hoped 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.”