Wipeout: Subprime Crisis Spawns Wave of Litigation

Law.com (06/03/08); Karabin, Sherry
Experts predict that the number of lawsuits tied to the subprime mortgage crisis will surpass the number filed during the savings and loan crisis by the end of 2008. Resolution Trust Corp. dealt with 559 lawsuits associated with the savings and loan crisis between 1989 and 1995, but Navigant Consulting Inc. reports that a total of 448 lawsuits involving subprime mortgages already have been filed between Jan. 1, 2007, through March 31, 2008. According to Navigant managing director Jeff Nielsen, "In the most recent quarter, we're looking at approximately two filings per day, including weekends." Of these lawsuits, 45 percent are borrower class actions; but given that borrowers do not stand to collect substantial damages, experts do not expect firms to be hit hard financially. Another 105 suits involve securities, and 58 of these are securities fraud class actions associated with declining stock or mortgage-backed securities fraud. Duke University law professor James Cox suspects some subprime-related securities lawsuits will be tossed out, except "those in which the plaintiff alleges misrepresentation or false statements at the moment of purchase or leading up to the purchase of the securities."