U.S. Court sides with City of Cleveland v Wall Street

U.S. Federal Appeals court sides with City of Cleveland (Ohio)

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT ANNOUNCES

For years the City of Cleveland (Ohio) has fought a herculean battle against Banks, Wall Street and the lenders which almost destroyed the entire housing stock of Cleveland. The city fought to Hold Banks accountable in local courts, State and Federal courts and even all the way to the U.S. Supreme Court. Unfortunately, the well funded banks have spent millions litigating these cases, going "all-in" with a transparent effort and goal to financially wipe out the city (with legal expenses). The banks hoped, litigating these cases, even to the point of absurdity, would teach Cleveland (and other cities) a lesson - Don't take on Wall Street! To date, that strategy has worked well by applying "legal paralysis" (on-going litigation) in an effort to prevent the already "asleep at the wheel" federal agencies and regulators from acting.

Fortunately, the U.S. Court of Appeals (for the Sixth Circuit) refuses to be "bought out" or "sell-out." The court continues to enforce the Rule of Law and even show the Supreme Court of Ohio they'll NOT allow the trashing of existing laws in favor of the Banks and Wall Street firms. Although this is not a win (on the merits of the suit), nonetheless, it holds co-conspirators Plaintiffs JP Morgan Chase (Chase Bank) responsible for procedurally abiding by the rules. The Sixth Circuit, took the time, as part of their published decision, to opine on the foreclosure crisis and added some colorful commentary (below) on the havoc that Wall Street brought on the city.

CHASE BANK USA, N.A., JPMORGAN CHASE BANK, N.A., JPMORGAN MORTGAGE
Acquisition Corp., and J.P. Morgan Securities, Inc.
Plaintiffs-Appellants/Cross-Appellees
V.
CITY OF CLEVELAND,
Defendant-Appellee/Cross-Appellant 

READ CASE DECISION: CASE Nos. 10-4115/4116

KAREN NELSON MOORE, Sixth Circuit Judge:
.....The foreclosure crisis that swept the nation in the latter half of the past decade hit Cleveland particularly hard. It also led to this litigation. Though this case has - as its background - such weighty factual topics as subprime-mortgage lending, foreclosures, and the precarious economic state of the post industrial Midwest, the issue at stake in this appeal is solely procedural. Because the district court (United States District Court for the Northern District of Ohio at Cleveland. No. 08-00514) nonetheless dismissed the suit...without notice to the parties, we REVERSE the judgment of the district court and REMAND for further proceedings.

Cleveland’s decision to address the issue of subprime-mortgage securitization through litigation arguably reflects an otherwise frustrated regulatory intent, as the city likely could not regulate such activity directly. Ohio law appears to prevent Cleveland from regulating subprime mortgages in the traditional manner (i.e. by municipal ordinance), as it vests the state with sole authority to “regulate the business of originating, granting, servicing, and collecting loans and other forms of credit in the state and the manner in which any such  business is conducted.” Ohio Rev. Code § 1.63(A). In addition, Ohio law expressly preempts “[a]ny ordinance, resolution, regulation, or other action by a municipal corporation” to regulate such matters. Id.§ 1.63(B). Indeed, the OHIO SUPREME COURT struck down Cleveland's previous attempt to regulate predatory mortgage lending by ordinance as preempted by state law, including § 1.63. Am. Fin. Servs. Ass’n v. City of Cleveland, 858 N.E.2d 776, 785–86 (Ohio 2006).

I. BACKGROUND

The City of Cleveland has seen a record number of home foreclosures in the past decade. Between 2000 and 2008, Cuyahoga County, Ohio, where Cleveland is located, recorded approximately 80,000 foreclosures. In Cleveland, Foreclosures Decimate Neighborhoods,NPR Radio, May 24th, 2008.

In 2007, County Treasurer Jim Rokakis described the city as "the epicenter of the mortgage meltdown in America." (Thomas Ott & Susan Vinella, Home Loan Foreclosures on the Rise in Cuyahoga, The Plain Dealer, July 4, 2007).  Against this backdrop came three (3) lawsuits relevant to this case:

A. City of Cleveland v. Ameriquest Mortgage Securities, Inc. (City of Cleveland I)

In January 2008, Cleveland brought suit against twenty-one (21) financial institutions in Ohio state court, alleging that the defendants’ actions in the subprime-mortgage industry constituted a public nuisance under Ohio common law. By securitizing subprime mortgages and later foreclosing on the houses purchased through such mortgages, the defendants allegedly contributed to a financial crisis in the city that included significant declines in property values, a shrinking tax base, and an increase in criminal activity. Cleveland sought to recover for the costs it incurred in monitoring, maintaining, or demolishing foreclosed properties and for decreased tax revenues. The defendants {Ameriquest} removed the case to federal court. {Then} after denying Cleveland’s motions to remand and to amend its complaint...the district court granted the defendants’ motion to dismiss on the grounds that the city’s suit was preempted by state law and was barred by the economic-loss doctrine.

B. City of Cleveland v. JP Morgan Chase Bank, N.A. (City of Cleveland II)

In August 2008, shortly after the district court denied Cleveland’s motion to remand in City of Cleveland I, Cleveland filed a second suit in Ohio state court against twenty-eight (28) financial institutions, including the non-diverse JPMorgan Chase Bank, N.A. In addition to pleading another public-nuisance claim, Cleveland alleged that the defendants had violated the Ohio Corrupt Activities Act (“OCAA”), the state RICO analogue, by inaccurately claiming title to mortgages and promissory notes in foreclosure proceedings in violation of Ohio Revised Code § 2921.12(A). See Ohio Rev. Code § 2923.32. Cleveland also sought to recover under Ohio Revised Code § 715.261 for costs incurred maintaining or demolishing foreclosed houses.

C. Chase Bank, USA, N.A. v. City of Cleveland (Chase Bank)

In February 2008, while City of Cleveland I was pending, Plaintiffs-Appellants Chase Bank, USA, N.A., JPMorgan Chase Bank, N.A., JPMorgan Mortgage Acquisition Corp., and J.P. Morgan Securities, Inc. (collectively, “Chase Bank”) brought the suit that is currently before us. Chase Bank sued Cleveland in federal district court... requesting an injunction against that suit. After Cleveland filed City of Cleveland II, Chase Bank amended its complaint to request declaratory relief and an injunction against both of Cleveland’s lawsuits.

D. Recent Developments:
Since this case left the district court, several developments have occurred in both City of Cleveland I and City of Cleveland II. In City of Cleveland II, the Cuyahoga County Court of Common Pleas dismissed Cleveland’s public-nuisance and OCAA claims, but denied the defendants’ motion to dismiss. {As}J.P. Morgan Chase Bank, N.A. and J.P. Morgan Securities, Inc. are defendants in City of Cleveland II. Cleveland voluntarily dismissed its §715.261 claim and appealed the trial court’s dismissal of the public nuisance and OCAA claims. That appeal is currently pending in the Court of Appeals of Ohio, Eighth Appellate District.

In addition, the United States Supreme Court denied Cleveland’s petition for a writ of certiorari in City of Cleveland I. City of Cleveland v. Ameriquest Mortgage Sec., Inc., 131 S. Ct. 1685 (2011). Accordingly, Chase Bank’s request for injunctive and declaratory relief regarding City of Cleveland I is now moot. All that remains of the suits in which Cleveland is the plaintiff is City of Cleveland II. Because Chase Bank, USA, N.A. and JPMorgan Mortgage Acquisition Corp. are not parties to City of Cleveland II, we dismiss their claims as moot.

Another Recent Case linked below from the same U.S. Federal Court (Sixth Circuit):

US Court of Appeals smackdown of Ohio Mill Firm - LSR

CLEVELAND WARNED the Regulators !! Yet...No one did a thing!!!
SHOCKING, STUNNING, and ACCURATE predictions are quotes from this now 4 year old (2008) article : As Decade Dawned signs of Crisis:   9-28-2008 - Roger Mezger

"We called it early... Nobody listened,"There was blood on the streets of Cuyahoga County. But it wasn't until there was blood on the streets of Wall Street that anyone cared."
(Jim Rokakis - Cuyahogo County Treasure)

'This is going to become an epidemic,' and they sat on their hands. For whatever reason, they didn't act. But if you were looking, the handwriting was on the wall. If you were looking, it was obvious something was wrong."
(Tony Stevenson, a staff attorney with Housing Advocates Inc. in Cleveland)

"Regulators allowed loose lending to keep the economy going. All the regulators knew what was going on."
(Raj Aggarwal, dean of the College of Business Administration at the University of Akron)

For years Cleveland had been WARNING "asleep-at-the-wheel" State and Federal regulators of what was to come.  Home prices had become so outrageous in value, that during a 6 year period, median home prices (in Cleveland) rose 56%, according to county real estate records, while the city's population dropped 4% during the same period. It didn't make sense. YET - No one in OHIO or the Federal Government would listen or do anything to stop these lenders and banks from pillaging the city.

Foreclose, Evict, Abandon - Sherrod Brown says NO

OH-Senator Sherrod Brown tells Banksters: STOP WALK-AWAYS and ABANDONMENT after a bureau of the U.S. Treasury (OCC) released guidelines that amount to a free pass for banks to abandon foreclosed homes - which invites crime and makes taxpayers foot the bill.

Brown's January 3rd letter to John Walsh, the OCC Director, highlights the public concern:

 I write today to express my grave concerns with provisions of the OCC’s guidance regarding the proper treatment of foreclosed properties.  Specifically, your guidance implicitly approves of the practice of having lenders “release a lien securing a defaulted loan rather than foreclose on the residential property.”  This practice, also known as an “abandoned foreclosure” or a “bank walkaway,” has caused substantial harm to Ohio’s communities and should NOT be supported by the federal government.

Strong standards from the OCC will send a message that Wall Street must share in the responsibility to end the foreclosure crisis.  Preventing banks from walking away from properties will give servicers greater incentive to avoid unnecessary foreclosures and explore alternatives to foreclosure.  Wall Street banks may be acting in their own economic interest when they walk away from vacant properties, but they are not acting in the best interest of our communities.

In Cleveland Ohio via newnet5

Senator Brown was joined by Jeannette Smith, a Cleveland Heights resident, that faced foreclosure several years ago and left her property at the point of Sheriff’s sale. Later, she found out that her mortgage servicer had withdrawn its foreclosure action. Jeanette had already signed an apartment lease and was also left on the hook for the Bank abandoned property. She was later cited and charged, by the City of Cleveland Heights, for the cost of maintenance of her vacant property.

SHERROD BROWN:

“Too many Wall Street banks are walking away from too many Ohio Main Street communities,”. Said Senator Brown (D-OH)

* “This foreclosure crisis affects all of us: homeowners, families, neighbors, and state and local governments. It is clear that the current system isn’t working and unfortunately federal regulators have failed to bring meaningful reform to mortgage servicing"

*SHERROD BROWN introduced the  Homeowner Abuse Prevention Act of 2011

1-3-12 PRESS RELEASE:
Brown Urges Agency to Take Action to Prevent Needless Evictions of Ohio Families and Neighborhood Blight

1-4-12: RELATED:   OBAMA names RICHARD CORDRAY to head CFPB

In a visit Wednesday to the Cleveland home of William and Endia Eason, who were victims of predatory lending, President Obama appointed Richard Cordray as head of the Consumer Financial Protection Bureau (CFPB). Speaking in Cordray's home state of Ohio, Obama blamed the “trickery and abuse” of the non-banking financial sector for the Easons’ woes and said, “We’re going to have to do something about it.” He added: “We’re so glad that we’ve got somebody like Rich Cordray, who’s willing to take this on and make sure that families like the Easons who do the right thing ... are not taken advantage of and are able to live in security and in dignity in their golden years.”

                  Thomas Ondrey - Plain Dealer

President Obama meets with Cleveland residents William Eason, left, and his wife Endia, along with newly appointed head of the Consumer Financial Protection Bureau Richard Cordray 

Sherrod Brown's Press Release:
Appointment of former Ohio AG Cordray to National Consumer Watchdog Head
“Ohio families deserve a Consumer Financial Protection Bureau (CFPR) - complete with a Director - that can stand up to the special interests and look out for Ohioans’ interests.  We asked for a fair up or down vote on Richard Cordray’s nomination. But too many senators are willing to stand instead with Wall Street, blocking a qualified nominee for the first time in the history of the Senate based on opposition to an agency’s very existence. Rich Cordray is fair-minded and highly qualified, which is why he enjoys widespread and bipartisan support from both the people of Ohio and those he would regulate.” said US Senator Sherrod Brown

Op-Ed by Sherrod Brown(12-6-11) POLITICO: CFPB Time is Now for Cordray 

OhioFRAUDclosure previous post: Ohio leaders shaping Fraudclosure landscape

National Blog recognizes: OhioFRAUDclosure (Mandelman Matters - HERE)

Mandelman Matters - Podcast with Former OHIO AG - Marc Dan  (HERE)