By Dionne Walker
The Associated Press
ATLANTA - Atlanta officials approved a resolution Monday that sets the stage for a lawsuit against predatory lenders blamed for runaway foreclosures across the metro area.
The city will hire a private firm to investigate whether there is reason to sue dozens of subprime lenders, according to the resolution's sponsor, city councilwoman Natalyn Archibong. The companies' tactics are believed to have helped Georgia gain the seventh highest foreclosure rate in the nation for the first quarter of 2009, according to Realty Trac, a Web site that tracks foreclosures.
The council unanimously passed the resolution, which does not name specific defendants.
Atlanta joins cities across the country that have sought to penalize financial institutions for rising foreclosures, which have emptied neighborhoods and eaten away at tax revenues.
Lawsuits have moved forward in Baltimore, Cleveland and Birmingham, Ala., to name a few.
Page Perry LLC will examine whether the city can take the matter to court, Archibong said.
She said there's no guarantee the city will move forward with pursuing litigation, another step that may need the council's approval.
Still, "finding a firm that will take this on is huge," said Archibong, who called it a vote of confidence that the city can recoup both lost tax revenues and public safety and code enforcement costs linked to communities blighted by multiple foreclosures.
Archibong had no estimate of how much foreclosures have cost the city.
Responsibility for the nation's foreclosure crisis has fallen on banks and mortgage lending companies blamed for extending high-interest loans to borrowers with poor credit. Once the housing bubble started to burst and interest rates ballooned, those home owners were left carrying mortgages they couldn't afford.
Many of them have been in Georgia: More than 10,000 foreclosed properties were scheduled to be sold on courthouse steps in metro Atlanta this month, according to EquityDepot.net, which placed Fulton County in the lead with 2,181 properties scheduled for sale.
Fed up jurisdictions across the country have turned to lawsuits targeting shady lenders with some success.
In October, Bank of America Corp. - which recently acquired mortgage giant Countrywide Financial Corp. - announced it would pay more than $8 billion for interest rate and principal reductions for nearly 400,000 customers and make other provisions to settle several states' claims that the company put home buyers in high-risk loans.
Archibong said Atlanta's resolution was crafted to help homeowners victimized by the market, not those just living beyond their means.
"I'm not talking about people who bought too much house," she said Monday. "I'm talking about folks who often times owned their homes for several years, and someone comes in and offers them this too-good-to-be-true loan."