Consumer Law

Subprime: the Lawsuits

By Alan White

By Alan White
Borrower class actions comprised 43% of subprime mortgage litigation filed in federal courts in 2007 according to a new report from Navigant Consulting, based on a survey of 278 cases. Other categories included securities investor claims (22%), commercial contract claims, mostly efforts to force originators to repurchase bad mortgages (22%), employment class actions (9%) and bankruptcy and miscellaneous (4%).

Among the consumer class actions, 36 alleged disclosure violations, 31 claimed improper charges (e.g. RESPA kickbacks), and 26 asserted discrimination claims under the Equal Credit Opportunity Act, Fair Housing Act or similar laws. A majority of the disclosure cases seem to have been brought by one firm challenging disclosures for "option-ARM" (i.e. negative amortization teaser rate) mortgages. The survey did not include any state court lawsuits, nor did it include lawsuits filed by lenders, which of course include hundreds of thousands of foreclosures filed in judicial foreclosure states, some of which are contested. As a result, the conclusions about the scope of litigation so far are necessarily understated. Pending cases filed before 2007, like the Ameriquest MDL class actions in Illinois federal court, are also not covered. HT to Kathleen Keest at the Center for Responsible Lending for spotting this.

Full post as published by CL&P Blog on March 11, 2008 (boomark / email).