Now one could argue that loose lending drove up prices in the first place. But then that would mean that LA owes mortgages lenders for all that extra property tax revenue it collected during the boom. Somehow I suspect they aren’t interested in sharing the up-side of boom/busts, just the downside. And if LA believes that foreclosures drove down prices and hence revenues, why isn’t the city suing all the borrowers who walked away from their homes? After all, under the City’s theory these delinquent borrowers cost the City tax revenues. But since some of these borrowers are voters, I doubt we’ll see any consistency from the City there.
At the end of the day this suit appears little more than cheap pandering meant to distract from the dysfunctional governance of Los Angeles. If mortgage lenders had any sense they’d just cut off lending to LA altogether, but then they’d probably get suited by DOJ for discriminating. Can’t win either way.
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