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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.


2007 Mortgage Litigation Report

Review of mortgage related lawsuits last year

February 11, 2008

By MortgageDaily.com staff


Mortgage lawsuits last year were dominated by investors accusing companies of financial fraud, according to a new mortgage litigation report. Other types of lawsuits frequently filed against lenders involved mortgage fraud, secondary marketing and employment.

The report was prepared based on lawsuits covered by MortgageDaily.com during 2007 with the assistance of Washington, D.C.-based Weiner Brodsky Sidman Kider PC, which provides timely information and analysis of litigation that impacts mortgage bankers.

During 2007, 53 cases were reviewed where mortgage companies were accused of misleading investors. Many of the lawsuits were certified as class actions.

Mortgage fraud was alleged in 25 cases. In many of those suits, lenders allegedly pressured real estate appraisers to inflate property values.

Another big area where mortgage bankers faced litigation was secondary marketing. Many of these cases involved investment bankers attempting to force lenders to buy back loans that had either defaulted early on or involved mortgage fraud. A total of 23 secondary marketing lawsuits were reported.

Mortgage employment cases reported numbered 16. These involved overtime, employment discrimination and employment contracts. Whistleblowers and WARN notice violations cases were also covered.

"With the collapse of the subprime mortgage market and the spillover effect on the rest of the housing market, these are undeniably challenging times," said Mitch Kider, managing partner of Weiner Brodsky. "According to some observers, the litigation spawned by the subprime crisis will be unprecedented. While it is true that many of the emerging lawsuits facing the mortgage industry will be new and unprecedented, what has not changed is the fact of litigation."

Kider, a frequent speaker on industry matters and a Faculty Fellow of the Mortgage Bankers Association who says he has handled over 100 class actions, noted the housing boom of the past 7 years saw plenty of private action lawsuits as well as initiatives by federal and state governments challenging industry practices.

He noted that in addition to predatory lending suits alleging discrimination based on race, language, and property location, cases involving RESPA claims also flourished.

"There were HUD enforcement actions that focused on sham affiliated business arrangements and referrals conditioned on payments of a thing of value," said Kider, who heads up his firm's litigation practice. "We saw the continuation of lawsuits as well as criminal investigations related to alleged fraud on the part of all industry players -- brokers, lenders, borrowers, settlement agents, and appraisers."

He cited an increase in litigation and proposed legislation related to so-called foreclosure rescue schemes, and added that this trend is expected to continue in 2008 given the record number of foreclosures.

"Now that the housing bubble has burst, in addition to continued litigation of existing issues, we are seeing new and different types of cases that will challenge the industry in 2008 and for some time to come," Kider explained. "Cities such as Baltimore and Cleveland have filed lawsuits against lenders and the investment banks that packaged and sold mortgage-backed securities. Baltimore's predatory lending suit asserts that a lender unfairly marketed subprime mortgages to African-Americans. Cleveland, on the other hand, is invoking its public nuisance laws in an attempt to hold 21 of the nation's largest banks and financial institutions responsible for the widespread foreclosures and abandonment of properties throughout that city.

"The growing foreclosure crisis has also led to lender suits filed by state attorneys general alleging loans were made to borrowers who did not quality. Fraud suits against each and every player in the industry will continue in 2008, as will investor claims of shoddy lending practices and demands that lenders and brokers repurchase defaulted or problematic loans. A whole new slew of securities-related investigations and lawsuits are anticipated for 2008 as the industry and government attempt to deal with the fallout of the subprime meltdown. New York's State Attorney General presently is investigating whether investment banks that sold mortgage-backed securities disclosed the risks to investors and credit-rating agencies."


Description

Category
(click for journal)
Description
# of Cases
Advertising Lawsuits about mortgage advertising, bait and switch ads, deceptive ads and do-not-call violations.
5
Appraisals Litigation related to real estate appraisals, pressuring appraisers and appraisal fraud.
5
Bankruptcy Legal issues surrounding borrowers who file for bankruptcy, including servicing bankrupt borrowers.
5
Commercial Cases related to commercial mortgage lending.
1
Copyright Lawsuits about copyright, trademark and intellectual property issues.
3
Credit Litigation based on credit reporting and other credit issues.
3
Discrimination Class actions and suits related to lending discrimination involving minorities, neighborhoods and property types.
14
Down Payment Assistance Cases about the legality of DPA programs and HUD's ability to prohibit them.
2
Employment Employment lawsuits involving overtime, employment discrimination and employment contracts. Whistleblowers and WARN notice violations cases also.
16
Fees Lawsuits involving excessive fees, servicing fees and loan fees beyond state maximums.
13
Foreclosures Servicer-related litigation, foreclosure lawsuits and cases against foreclosure rescue services.
11
Fraud Cases involving mortgage fraud, flipping, identity theft and inflated appraisals.
25
Insider Trading Criminal cases about mortgage executives accused of trading securities based on insider information.
2
Investor Shareholder lawsuits and class actions accusing companies of inflating earnings, overstating capital position or otherwise deceiving investors in the company. Other shareholder issues.
53
Licenses Regulator lawsuits against improperly licensed and unlicensed mortgage companies.
2
Mergers Lawsuits relating to mergers and acquisitions.
1
Predatory Cases involving allegations of predatory lending.
7
Pre-emption Litigation involving the rights of states to regulate federally regulated institutions.
1
Privacy Privacy law violation cases.
3
RESPA Litigation involving alleged violations of the Real Estate Settlement Procedures Act.
5
RMBS Lawsuits related to mortgage-backed securities.
2
Secondary Marketing Cases related to secondary marketing, warehouse lending and repurchases.
23
Servicing Litigation related to loan servicing, including escrow issues, transfer of servicing and servicing borrowers in bankruptcy and foreclosure.
14
Suitability Lawsuits about mortgage company liability in determining suitability of loans for borrowers.
1
Technology Lending technology issues litigated.
2
TILA Cases involving allegations of violations to the Truth In Lending Act and missing disclosures.
6
YSP Litigation centered around yield spread premiums and YSP disclosures.
4

Weiner Brodsky Sidman Kider PC
Weiner Brodsky Sidman Kider PC
1300 19th Street NW 5th Floor
Washington DC 20036
202.628.2000
www/WBSK.com


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