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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.


Mortgage Litigation Index Off Despite Deterioration in Disputed Foreclosures

Mortgage Litigation Index 223 in Q4-2012

March 25, 2013

By Mortgage Daily staff


table by category | read white paper

The mortgage industry spent less time in court during the final three months of last year as litigation tied to employment and compliance slowed. But above-normal activity is expected to persist in the foreclosure, investor and regulator categories.

The fourth-quarter 2012 had activity on 223 mortgage-related cases tracked by Mortgage Daily for its Mortgage Litigation Index. The cases, which include lawsuits filed in federal and local courts as well as settlements, are deemed significant by Mortgage Daily's editorial staff and had some activity between Oct. 1, 2012, and the end of last year.

After peaking at 264 in the second-quarter 2012, the index has fallen for two consecutive three-month periods.

Case activity -- including complaint filings, court rulings and appeals decisions -- was a little lighter than the 231 cases tracked in the third-quarter 2012.

Activity was also slower than in the fourth-quarter 2011, when the number tracked was 244 cases.

The most-recent decline was helped along by mortgage employment cases, which fell to the lowest level in 10 quarters. Employment litigation had been as high as 11 cases in the second quarter before retreating to just four during the latest period.

Foreclosure-related cases, those that have had a negative ruling against the servicer or involved foreclosure-rescue service activities, climbed to 120 -- the highest level since the Mortgage Litigation Index launched in 2007.

An accompanying white paper authored by Christopher J. Willis, partner at Ballard Spahr LLP, discusses the trend in foreclosure cases.

"The data suggests that foreclosure activity is converting into litigation at a higher rate than previously existed, and we suspect that the accumulated weight of continued publicity, governmental enforcement actions, and evolving theories of liability for mortgage servicers are all contributing to this trend," Willis wrote. "This means that, even though mortgage delinquencies and foreclosure numbers are moving in a lower direction, the level of foreclosure- and delinquency-spawned litigation may continue to persist at its current high levels."

Cases involving loan modifications, which are often among some of the actions also listed in the foreclosure category, were the most in seven quarters at 23.

Reaching a five-quarter high, investor cases totaled 63.

Loan title cases were the lowest in five quarters, though the decline was at least partially impacted by a change beginning in the second-quarter 2012 that excluded certain favorable MERS-related cases where the borrower never advanced in the judicial process.

The four consumer bankruptcy cases involving lender challenges or challenges to lenders' interests were the fewest in five quarters.

But when looking at corporate bankruptcies, the nine cases tracked marked the third consecutive quarter-over-quarter increase. One of 2012's most notable corporate bankruptcies was that of Residential Capital LLC.

Criminal cases, at 42, crept up from the third quarter but have slowed from the 57 cases in the year-earlier period.

Litigation activity involving alleged compliance violations came in at a dozen actions during the final three months of 2012 -- the fewest in three quarters. Compliance cases had climbed as high as 22 in the second quarter of last year.

Investor litigation, which often involves mortgage-backed securities, continued to see greater activity, and Willis predicts that investor litigation will remain significant into this year.

Mortgage Litigation
Biggest Categories


Category Q4 2012 Q3 2012 Q4 2011
Total 223 231 244
Foreclosure 120 109 99
Servicing 90 88 70
Investor 63 43 62
Title 46 55 46
Criminal 42 41 57

Willis observed that regulators "continue to be very active in bringing mortgage-related enforcement actions."

He said recent regulatory developments such as finalization of the Qualified Mortgage/ability-to-repay rule by the Consumer Financial Protection Bureau will increase opportunities and incentives for mortgage-related litigation when the rules go into effect next year. He called for the mortgage industry to closely monitor any attempt by borrowers to establish precedent that would make it difficult for a creditor to use the QM safe harbor to preclude a claim from reaching the trial stage

Willis expects borrowers to test the various new private rights of action under the CFPB mortgage regulations issued in January both in defense of foreclosure and as independent claims.

He forecasts no return to a normal level of mortgage litigation for the foreseeable future.


Mortgage Litigation Index 223 in Q4-2012


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