Pace of subprime lawsuits outpacing S & L crisis.
The Navigant study, Subprime Mortgages and Related Litigation: 2007--Looking Back at What's Ahead, noted that the number of subprime-related cases filed in 2007 already equals half of the total 559 S & L cases handled by the Resolution Trust Corporation (RTC) over a multiple-year period.
However, the subprime numbers in the study represent only federal court filings, explained Jeff Nielsen, managing director of Navigant Consulting.
"The S & L crisis has been a high-water mark in terms of the litigation fallout of a major financial crisis," said Nielsen. "The subprime-related cases appear on their way to eclipsing that benchmark."
Geographically, about half of all cases filed are in California and New York courts, the study noted.
The number of subprime-related cases filed doubled during the second half of 2007--from 97 to 181, totaling 278 cases. These cases included borrower class actions (43 percent), securities cases (22 percent) and commercial contract disputes (22 percent), along with bankruptcy, employment and other cases.
"This appears to be just the beginning," said Nielsen. "We are already observing a steady acceleration of continuing litigation activity into 2008."
The study also found that virtually every participant in the subprime collapse is being sued.
Fortune 1000 companies were named in 56 percent of cases. Mortgage bankers and loan correspondents represent the highest percentage of defendants (32 percent) but defendants also include mortgage brokers, lenders, appraisers, title companies, home builders, servicers, issuers, underwriting firms, bond insurers, money managers, public accounting firms, and company directors and officers, among others.
"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," said Nielsen.
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|Title Annotation:||Briefing Book|
|Comment:||Pace of subprime lawsuits outpacing S & L crisis.(Briefing Book)|
|Date:||Apr 1, 2008|
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