Mayor Brandon Scott’s administration has opened an investigation into a small group of real estate investors whose business methods prompted a wave of residential foreclosures in predominantly Black neighborhoods starting this spring, his office said early Tuesday morning.

The city’s Law Department, in conjunction with the Office of Equity and Civil Rights, will specifically assess whether the New York-based investors committed violations of the Fair Housing Act, a federal law meant to prevent discrimination based on age, race, disability and other protected classes. In a Tuesday news release, Scott’s office noted that the majority of the properties linked to the investor group were located in East and West Baltimore’s predominantly Black neighborhoods — including in areas key to the city’s 15-year vacant housing reduction initiative.

The announcement comes weeks after The Banner reported on the growing number of foreclosures among homes owned by the New York investors — and how city residents were caught in the fallout. Baltimore investors have used the financial product, known as a debt service coverage ratio — DSCR — loan to rehabilitate housing some traditional banks wouldn’t touch.

In a statement, Scott said he would hold individuals who violated the law accountable, “and that means going after anyone who tries to defraud our residents — especially from outside of the city."

City Solicitor Ebony Thompson said the city would use every legal resource at its disposal.

“When tools and products that were meant to help communities overcome the legacy of redlining are twisted in vehicles for personal greed and fraudulent gain,” Thompson said, “that will not go unnoticed.”

One of the investors, Benjamin Eidlisz, declined to comment. A second investor, Eluzer Gold, did not immediately respond to requests for comment.

Later Tuesday, outgoing housing commissioner Alice Kennedy said the city and state were also convening a work group to handle the needs of any tenants living in the properties who may be “stuck in a limbo” as a result of the foreclosures. That includes the sheriff’s office which carries out evictions, Kennedy said.

The city has also been looking at opportunities to log any of the properties in its vacant building system, which opens up additional legal avenues to address them. So far, the city has identified a total of 96 such properties, for a total of 14% of the portfolio.

In all, nearly 60% of the portfolio falls within the city and state’s “Vacancy Reduction Priority Geographies.” More than 2,000 citations have been issued on the homes since their last sales date, and almost all have liens, such as overdue water bills and property taxes.

Kennedy said one outcome the city favors is finding a “foreclosure management entity,” akin to a receiver, that could maintain the properties and keep them from deteriorating.

The city first caught wind of possible “misuse” of DSCR loans this past June, the administration said.

It’s become increasingly popular in Baltimore over the last five years, a Banner analysis of national mortgage data found, and typically has less stringent requirements than conventional mortgage loans. There’s also no borrowing limit — meaning an investor with enough cash for down payments can theoretically acquire an unlimited number of homes.

The loans are often bundled together in massive pools of mortgages and sold to investors worldwide as securities. Private equity and life insurance companies, including big names such as JPMorgan Chase and U.S. Bank, bought much of the debt.

In Baltimore, a group of investors leaned heavily on DSCR loans and scaled quickly, at one point owning a collective 704 homes between them. Then the mortgages began defaulting one by one, and lenders and noteholders got stuck with millions of dollars in debt.

It’s believed at least $100 million was loaned to the investors by private mortgage lenders. The city called the situation “fraudulent,” and said the mass defaults have put many city residents at risk.

Meanwhile, as the Fair Housing investigation gets underway, the city will be filing actions to collect on “thousands” of dollars in unpaid taxes and liens by the property owners. The Tuesday news release did not specify an amount, but a Banner data analysis found less than a quarter of all the identified properties had paid a water bill this year alone.

This is a developing story.