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Lawsuits are coming to town...

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February 18, 2008 – Comments (6)

I am sure I did a post about lawsuits coming to town over this mess...

Have you factored in legal defense into your portfolio projections?

 From Housing Wire

As the estimated financial cost of the current mortgage crisis surpasses the damage of the savings & loan crisis of the late 1980s, a new study released late last week found that the number of subprime-related cases filed in federal courts is also outpacing the savings-and-loan (S&L) litigation of the early 1990s.

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, according to financial advisory firm Navigant Consulting, Inc. The subprime numbers represent only federal court filings — so the actual number of cases may be higher.

“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 subprime-related cases filed doubled during the second half of 2007, from 97 to 181 (for a total number of 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 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 study 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, homebuilders, servicers, issuers, underwriting firms, bond insurers, money managers, public accounting firms and company directors and officers, among others.

 

6 Comments – Post Your Own

#1) On February 18, 2008 at 2:38 PM, dwot (47.53) wrote:

 Here's another one, people are not fighting back at all...

http://www1.pressdemocrat.com/article/20080217/NEWS/802170357/1036/BUSINESS01

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#2) On February 18, 2008 at 4:27 PM, GS751 (27.40) wrote:

interesting

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#3) On February 18, 2008 at 5:50 PM, abitare (35.58) wrote:

Going to get ugly....

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#4) On February 19, 2008 at 12:00 AM, lquadland10 (< 20) wrote:

There are also lawsuits for hedgefunds also. As they sell stocks to cover cost I wonder if they all sell at once will the stock market shut down? This is just the tip of the Ice Burg. It is much worse than the 80's. I wonder how ing direct share builder accounts fare.Any ideas out there?

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#5) On February 19, 2008 at 9:24 AM, CycleFreak7 (< 20) wrote:

re: dwot's comment ...

Why fight to save a house that is now worth $500k when you paid $750k for it 2 years ago and your mortgage rate is adjusting up?

I was out in Napa / Sonoma in early January. A few houses I notice for sale, I looked up on the web. One very modest looking house  near Napa that was 2,100 sq ft. had an asking price of $675,000.

Are you kidding me? My house is slightly larger than that and I paid more than $500,000 LESS for it. OK, so I live in Ohio, still ...

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#6) On February 19, 2008 at 10:05 AM, dwot (47.53) wrote:

CycleFreak7, my comment was an observation about what is happening.  I probably should have prefaced it with, and why would you fight to save a home that is a lead weight around your neck.  I really didn't give an opinion one way or another, just a link to what really is a huge change.  The comment in the story about how fast the foreclosures are being processed because people are just going through the formality of getting rid of the lead weight caught my attention.  I bet some dork in 10 years is going to go on about how inefficient the courts have gotten by comparing the speed in which these uncontested foreclosures are going through to when you have proceedings where both parties have an interest in fighting.

I agree completely that a 2,100 sq ft home is still grossly over priced at $500k.

I bet I still had about what you paid for your home of debt on my Vancouver home that I sold last month and I had 14.5 years of paying about $30k/year of mortgage, property taxes and strata fees.  Some years it was more and some years it was less, but I think that was about average, and actually, that doesn't include some extra lump sum payments or the downpayment.  I'd say I paid close to a half million dollars into housing over the years I was a home owner.

I completely feel that I paid my dues that I ought to have owned a very nice home outright for what I put into housing.

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