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Subprime Mortgage Litigation Outpacing S&L Crisis


The number of subprime-related lawsuits is outpacing those during the Savings and Loans crisis in the early 1990s, according to a press release from Navigant Consulting Inc.

Per the study, subprime mortgage cases filed in 2007 alone equaled half of the 559 Savings and Loan suits over a multi-year period handled by the Resolution Trust Corporation, who oversees the liquidation of insolvent thrifts.

“The S&L crisis has been a high water mark in terms of the litigation fallout of a major financial crisis. The subprime-related cases appear on their way to eclipsing that benchmark,” said Jeff Nielsen, managing director of Navigant Consulting.

The number of filed lawsuits linked to subprime nearly doubled during the second half of 2007, from 97 to 181, with a total of 278 cases for the year.

The cases were made up of borrower class actions (43 percent), securities cases (22 percent), and commercial contract disputes (22 percent), as well as bankruptcy, employment, and others.

Fortune 1000 companies were named in more than half of the cases, and mortgage bankers and correspondents were the most common defendants, involved in about a third of the suits.

“This appears to be just the beginning,” said Nielsen. “We are already observing a steady acceleration of continuing litigation activity into 2008. The course of regulatory investigations, the prospect of government intervention and marketplace variables may affect the volume of filings, but the explosion of cases in 2007 suggests a daunting forecast of what is still to come.”

The group found that roughly half of the suits were filed in courts in either New York or California, focusing on mortgage brokers, lenders, appraisers, title insurance companies, homebuilders, servicers, and more.

(Photo: jpctalbot)

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