by: Jodie Fleischer Updated:
ATLANTA - Channel 2 Action News has learned three metro Atlanta area counties are taking on a major bank, saying predatory lending has hurt neighborhoods and cost tax revenue.
Cobb, DeKalb and Fulton counties filed a lawsuit Thursday against HSBC, saying damages are in the hundreds of millions of dollars.
"It is the first instance in Georgia of the local governments, on behalf of the people, saying, 'We are all victims of the mortgage foreclosure crisis,'" said Emory professor Frank Alexander, who specializes in real estate finance.
Thousands of boarded up
homes with overgrown lawns are signs of the mortgage meltdown still hammering metro Atlanta neighborhoods.
The lawsuit alleges predatory and discriminatory mortgage lending by HSBC encouraged foreclosures, which lower values for all homeowners.
The suit, filed in federal court, makes claims under the Fair Housing Act.
"The lawsuit alleges that [HSBC] made loans that were racially
discriminatory; that the terms of the loans they made to minorities or persons of color were different than loans they were making to other people," Alexander said.
Records show HSBC owns more than 160 properties within the three counties but has taken over roughly
3,500 since 2006.
The company's foreclosure totals are likely much higher, since most banks only keep a portion of the properties on which they foreclose.
HSBC also acquired a company, called Household Finance Corporation, known for questionable lending practices in Atlanta.
"Household Finance was known to be originating a lot of mortgages which everyone would classify as a predatory loan with very low likelihood that it would live as a mortgage more than a few months or years before it goes into default," said Alexander, who believes this lawsuit could lead to others if evidence released in the case offers new details about bad loans.
"If this litigation continues and the information becomes disclosed at a public trial, all borrowers that had Household Finance loans in metro Atlanta should be watching that data with a great deal of interest," said Alexander.
Defaulted loans often lead to empty homes, with plummeting values for surrounding residents, like Nathaniel Davis.
"These are some nice houses, and some of them are going down. Folks have trashed them out," said Davis of his southwest Atlanta neighborhood.
"I think they need to come out here and clean it up," added Davis. "If they're going to take somebody's house from them, I think they need to at least put some kind of work into it."
Alexander said lawsuits under the Fair Housing Act are usually filed by the individuals who were wronged, not county governments.
He said the plaintiffs will have to overcome that hurdle.
"They [HSBC] will challenge each and every aspect of this complaint," said Alexander. "But what it will do is allow the plaintiffs and defendants to wrestle with the underlying question of, 'Did you do something that ultimately has hurt all of us?'"
A spokesperson for HSBC did not return Channel 2 Action News' calls.