Since the 2008-09 housing market collapse, many homes have gone into foreclosures and have been ignored altogether. Big commercial banks that held the mortgages have given up on these homes, leaving them in disarray. U.S. Bank and Deutsche Bank are but two of the major banks that have neglected these foreclosed properties. The City of Los Angeles is suing these banks for $13.4 million. Ignoring these properties has turned these once appealable pieces of property into sources of blight or centers for crime. These now vacant properties have become home to squatters and drug addicts. City aims to hold these banks responsible for the disarray. Property value and likewise property tax has dropped because of this. City has spent millions of dollars making sure these once residential centers become formidable and of value yet again. But the banks must be held responsible.
2008-09 Recession Opened Doors to Federal Investigations of Big Banks
The 2008-09 recession and the aftermath remapped the legal framework. Dodd-Frank, among the other pieces of legislation, increased government regulation over the financial sector. Numerous lawsuits have appeared since the ‘09 financial crisis. Big banks like the aforementioned have been negligent towards their consumers and borrowers. Houses have turned into zombie foreclosures, where vagabonds and drug addicts have taken up residence. This not only drives the property value down but is a catalyst for crime and other such activities.
Mortgage fraud prior to and after the recession has been an ongoing problem as well. These large corporations have the tools to evade the federal government from prosecution. Subprime mortgages, as a form of mortgage fraud, was one of the underlying causes of the recession. Dodd Frank was a response to this and since the market’s uptick, the Fed has been hammering down on these banks and the executives responsible for such crimes. It is an ongoing problem and many have successfully managed to evade the law. To date, only a few small loan officers-small fish-have been convicted of different offenses relating to the financial crash.
Los Angeles to Hold Banks Accountable For Negligence
This lack of regulation over the financial sector has given different parties, such as the City of Los Angeles, a means to initiate legal action. Although most of these cases will be settled outside of court, it gives the commercial banks a reason to become concerned. Hopefully, this will act as a deterrent. As for the increase in crime, the City will have to take it into their own hands to ensure that the problem does not continue.
At the end of the day, the big banks should be held accountable for the negligence that results from their ongoing relationship with consumers and borrowers. Derelict nature of forgotten properties has hurt both the City and the market in many ways. Dodd Frank is a stepping stone to further legislation in this arena, but a tougher stance must be adopted in order to prevent such fraudulent and negligent behavior from occurring. It is not only the City of Los Angeles that tackles these issues; both coastal sides of the country have been hit with a great deal of foreclosed homes that have been abandoned.
Authored by Sam Behbehani, LegalMatch Legal Writer