|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Litigation Just Starting In Subprime Meltdown, 'Broad Range' Of Issues Predicted
Beth Bar
New York Law Journal. April 12, 2007
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EXCERPT: High profile collapses of lenders that provide subprime or high-risk home mortgages to those with poor or no credit has sent ripple effects throughout the mortgage business. 'The industry is in serious trouble,' said Harvey R. Miller, a partner at Weil Gotshal & Manges. Some of that 'trouble' will play out in the courtroom. Legal observers say the litigation fallout from the subprime mortgage industry meltdown is just beginning. 'You are going to see a broad range of litigation in this area, from securities class actions to private litigation by borrowers to government regulations and, in some cases criminal probes,' said Gerald H. Silk, a partner at plaintiff's firm Bernstein Litowitz Berger & Grossmann. Nationally, mortgage lenders New Century Financial, NovaStar and Accredited Home Lenders have all been hit with federal securities class action lawsuits. When New Century, the nation's second largest loan provider, filed for bankruptcy in Delaware last week, it revealed that the Securities and Exchange Commission is looking into its business practices, as is California's U.S. Attorney. In New York, a wide variety of lawsuits are making their way through state and federal courts. In one, DLJ Mortgage Capital, a unit of Credit Suisse Group that purchases mortgage loans, has sued mortgage lenders in the Southern District, accusing the defendant companies of failing to honor the requirements of loans that it purchased from them or of failing to pass along to them money as part of mortgage servicing agreements. Meanwhile, a local plaintiff's attorney is attempting to hold mortgage lenders legally accountable for their lending decisions under a standard currently applied only to investment institutions. In a case filed in Nassau County state Supreme Court, attorney Jacob H. Zamansky of Zamansky & Associates is arguing that mortgage companies should be legally prevented from providing loans to 'unsuitable' borrowers who have little chance to make required interest payments. Senator Charles Schumer, D-N.Y., has introduced federal legislation that would prohibit loans to such obviously unsuitable borrowers. Scott E. Mollen, a partner at Herrick Feinstein and a New York Law Journal columnist, said he expects more lawsuits to be filed as bankruptcy filings continue. 'We are still at the early stages,' he said. |
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