Cleveland Housing Renewal Project sues Deutsche, Wells Fargo banks over sale of foreclosed homes
Judge halts sales of foreclosed homes  

A Cleveland nonprofit group thinks it has found the legal tool needed to stop banks from dumping dilapidated, foreclosed properties back into the real estate market for pennies on the dollar.

Cleveland Housing Renewal Project Inc., a subsidiary of Neighborhood Progress Inc., sued Deutsche Bank and Wells Fargo Bank in Cleveland Housing Court on Monday to prevent the banks from selling 36 foreclosed homes in Cleveland.

The complaints accuse the banks of creating a public nuisance for having failed to maintain the homes, all of which are vacant and in poor condition, after taking them at sheriff's sales.

The lawsuit asks that the banks be ordered to either repair the homes to make them livable or demolish them.

Housing Court Judge Raymond Pianka granted the group's request for a temporary restraining order that stops the banks from selling the homes for at least two weeks. A hearing is scheduled for Dec. 29 on whether to make the order permanent.

Attorneys for Cleveland Housing Renewal say Deutsche Bank, Wells Fargo and other banks have sold several thousand dilapidated, foreclosed properties here in the last few years, some for as little as $1,000. Most of these sales have been made to out-of-town buyers who have done nothing to improve the properties before selling them again.

The blighted structures have driven down housing values in Cleveland and inner-ring suburbs, officials contend. And the bargain-basement sales have served to further depress Cuyahoga County's tumbling residential real estate market.

"We want them to pick up the tab for the business model they have chosen to follow," said attorney Kermit Lind, a Cleveland State University professor who is representing Cleveland Housing Renewal.

Frank Ford, executive director of Cleveland Housing Renewal Project, said Monday's lawsuits could be the first salvo his organization fires in an effort to make banks accountable for their role in Cuyahoga County's foreclosure crisis.

"We're not doing this just for those 36 properties," Ford said. "We're doing this to create a model that can be used by us and by others to go after other lenders and other properties."

The lawsuits list 25 Deutsche Bank and 11 Wells Fargo properties. The banks' presence in the local real estate market is much larger. Deutsche Bank owns nearly 1,300 houses in Cuyahoga County and Wells Fargo about 800, the complaints said.

A Deutsche Bank spokesman in New York declined to comment about the lawsuit. A Wells Fargo spokeswoman said the company had not received the complaint and could not comment.

Deutsche Bank and Wells Fargo did not originate the mortgage loans that led to the foreclosures, but were paid as trustees responsible for protecting investors who had bought shares of securitized pools of mortgages. All of the homes listed in the complaint foreclosed after buyers received high-cost subprime mortgages.

The Deutsche Bank trustee issued a statement that said decisions about upkeep and maintenance of foreclosed homes are the responsibility of servicing companies that collect mortgage payments, not the trustee.

This is not the first time investment banks have been sued in Cuyahoga County for creating a public nuisance. Cleveland sued 21 investment banks, including Deutsche Bank and Wells Fargo, in January for their roles in the subprime loan and foreclosure crisis. That lawsuit is pending.