Council Says OK to City Lawsuit

Amos Maki, Memphis Commercial Appeal, January 7, 2009

City Council members on Tuesday approved a resolution authorizing the city to file suit against national lenders who they say created a foreclosure crisis in Memphis and Shelby County that disproportionately affected African-Americans.

The resolution alleges lenders engaged in “deceptive” and “discriminatory” lending practices targeted at the black community and “other select groups” that caused “substantial” and “irreparable” harm to neighborhoods and the governments.

The Shelby County Commission recently approved a similar resolution, claiming the foreclosure epidemic has devastated neighborhoods, slashed property values, eroded the tax base and drained local government coffers because of a host of direct and indirect costs.

“They have caused property values to plummet,” said Webb Brewer from Memphis Area Legal Services, which is working with the city and county on the lawsuit. “As the property values go down, the property taxes go down. There are a lot of increased costs, like police and fire protection.”

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The resolution, which also includes authorizing $125,000 for legal expenses, says the goal of the suit would be to recoup the losses the governments have suffered and temporarily put a halt to foreclosures going forward.

Some council members wondered what happens if the cost of the lawsuit escalates beyond expectations.

“What happens when it become $1 million, or $5 million or $7 million?” asked Wanda Halbert.

But other council members said the cost to homeowners in trouble and governments dealing with the crisis demanded action.

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The resolution specifically mentions African Americans and “other select groups” because attorneys may want to argue the lenders violated the fair-housing act, which requires proof that a minority group was targeted.

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Council members Bill Boyd, Joe Brown, Janis Fullilove, Edmund Ford Jr., Myron Lowery and Ware voted to approve the lawsuit. Council members Kemp Conrad, Shea Flinn, Jim Strickland and Halbert abstained. Council member Reid Hedgepeth recused himself because of his membership on the board of a local agency. Council members Harold Collins and Bill Morrison did not vote.

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