Mystery surrounding Detroit’s lack of legal action

by Justin da Rosa29 Jun 2015
Detroit was perhaps hit hardest by the subprime mortgage crisis and despite other states taking legal action against the big banks for “predatory” lending, it chose not to pursue such action – despite many blaming lenders for the blight that still plagues the city.

“There's no doubt in my mind if banks did what they were supposed to do we would not be in the situation we are," former Detroit mayor Dave Bing told The Detroit News. "They were the primary reason for blight in the city of Detroit."

The publication is producing an ongoing project on foreclosures in the city and, as part of that, it discovered that one third of homes in the city have gone into foreclosure since 2005. It also found that 56 percent of 65,000 properties that have gone through foreclosure are now “blighted or abandoned” and to demolish them would cost Detroit taxpayers $195 million.

Of course, a major contributor to this state of affairs in the motor city was the subprime lending which, according to The Detroit News, was among the most prolific in the nation.

It states that 68 percent of loans to Detroit homebuyers in 2005 were high-cost loans, compared to 24 percent in the rest of the nation.

And still, while other cities targeted the big banks seeking compensation, then-mayor Bing claims no such proposal ever reached his office.

Bing’s former legal counsel, Krystal Crittendon, claims she drafted a proposal with Deputy Mayor Saul Green to sue over the lending practices and that the pair met with law firms who had had success against major banks while representing major cities.

Crittendon can’t discuss details what went wrong with the plan, citing attorney-client privilege. Though she would have liked to see something come of it.

"I would have liked to have seen my city government go after the banks," she told The Detroit News. "Everyone should be held accountable, even the banks."


Should CFPB have more supervision over credit agencies?