Half of Cleveland subprime loans in ’05 failed
Associated Press
CLEVELAND — About half of the city’s subprime mortgage loans written by top lenders in 2005 ended in foreclosure filings, leading to Cleveland having one of the highest foreclosure rates in the nation, The Plain Dealer reported Sunday.
Subprime mortgage loans, which are generally given to people with poor credit and come with higher fees and interest rates, were billed as helping people achieve the dream of owning a home.
But now Cleveland is struggling with the negative impacts of the subprime crisis — foreclosures, sinking property values, abandoned homes and crime.
The city’s five top lenders in 2005 — Argent Mortgage, Long Beach Mortgage, New Century Mortgage, Aegis Funding and People’s Choice Home Loans — originated 28 percent of the 15,000 mortgages sold in Cleveland that year, The Plain Dealer said.
Court records show that 48 percent of those loans to purchase or refinance city houses have resulted in a foreclosure lawsuit, the newspaper said.
All five lenders have since been absorbed by other companies or have since gone out of business, and there is no accurate way to determine what percentage of subprime mortgage loans may have been based on fraudulent or unscrupulous lending practices, the newspaper said.
Kathleen Engel, a law professor at Cleveland State University, said assigning criminal liability to executives at mortgage origination companies and investment banks could prove difficult.
A prosecutor would need to prove that executives intentionally participated in fraud. Part of the attraction of subprime lending, Engel said, was how lenders and investment banks insulated themselves from potential liability.
“The reason we saw such huge growth in independent brokers was because they wanted brokers to do the dirty work,” Engel said. “They were able to put a shield between themselves and liability for wrongdoing.”
Ohio Attorney General Marc Dann is funding a task force to study mortgage fraud in Cleveland, and the Cuyahoga County prosecutor’s office has indicted 171 people on charges of making $41.5 million fraudulent loans since 2007.
Nationally, the FBI and the U.S. Securities and Exchange Commission have 19 separate investigations of mortgage lenders, investment banks and rating agencies, the newspaper said. Those investigations are focused on accounting fraud and insider trading.
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Filed by Associated Press May 12th, 2008 in Local and State. Popularity: 4% |
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