Tuesday, September 16, 2008

Subprime Suits Surpass S&L Era Litigation

More than 600 lawsuits related to the subprime mortgage crisis were filed in U.S. federal courts since January 2007, including 310 in the first six months of this year, surpassing litigation related to the U.S. savings and loan collapse of the 1990s, according to a consulting firm report.

The Navigant Consulting Inc. study released yesterday counts cases filed by investors and borrowers as well as court complaints concerning the auction-rate securities market.

Navigant said the 310 lawsuits filed from January to June exceeded the number filed in all of 2007.

Subprime-related suits outnumber the 559 filed during the collapse of the savings and loan industry, according to the report. Lawsuits related to that crisis were filed over a six- year period ending in 1995, according to Navigant. The complaints were brought by the Resolution Trust Corp., created by the federal government to liquidate assets of failed banks in an effort to repay creditors.

The government sold or closed 747 U.S. thrift institutions, costing taxpayers about $140 billion. The RTC recovered almost $400 billion from asset sales, its acting chief executive officer, John Ryan, said when the RTC concluded its operations. The agency's remaining assets and liabilities were transferred to the Federal Deposit Insurance Corp.

In subprime litigation, a Fortune 1000 company was named as a defendant in 59 percent of the lawsuits filed during the first six months of this year, according to the report. A study published by Navigant at the end of 2007 said mortgage bankers were the most frequent plaintiffs' target.

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