Mortgage Litigation Rose Significantly in Fourth Quarter

Mort­gage ser­vicers were plagued with law­suits in the last quar­ter of 2010, accord­ing to an indus­try resource. A quar­terly report con­ducted by Mort­gage Daily shows the per­cent­age of legal actions against ser­vicers rose 42 per­cent in the last three months of 2010.  With some recent land­mark cases falling on the side of the home­owner, attor­neys rep­re­sent­ing home­own­ers have been seem­ingly embold­ened.  This has led to some very aggres­sive rep­re­sen­ta­tion in fore­clo­sure defense of home­own­ers, includ­ing fil­ing law­suits against lenders and ser­vicers, as well as some mass join­der suits.  Most of these suits have come against the larger lenders and servicers. 

Actions asso­ci­ated with loan mod­i­fi­ca­tions tripled. The report said that 151 mortgage-related law­suits were reported in the fourth quar­ter, jump­ing from 106 in the pre­vi­ous quar­ter.  One expert noted “The pro­pa­ganda cam­paign to scare home­own­ers away from attor­neys that can actu­ally assist them has diminished.  A greater num­ber of con­sumers are retain­ing attor­neys to rep­re­sent them in nego­ti­a­tions with their lenders and results are begin­ning to show. 

The index is pre­pared in con­junc­tion with Pat­ton Boggs, LLP, a mort­gage bank­ing law firm. Ser­vic­ing lit­i­ga­tion cases rose by 21 cases in the fourth quar­ter, from just five in Q3. Mort­gage Daily reports that ser­vic­ing was busier because fore­clo­sure law­suits in Q4 nearly dou­bled the amount from Q3 and mod­i­fi­ca­tion activ­ity climbed 208 percent.

Investor law­suits also dou­bled from the third quar­ter, which the news orga­ni­za­tion sur­mises was because of a sim­i­lar increase in lit­i­ga­tion asso­ci­ated with mortgage-backed secu­ri­ties. Sec­ondary mar­ket­ing lit­i­ga­tion nearly dou­bled, and crim­i­nal cases also rose.

“The affir­ma­tive inquiries of state attor­neys gen­eral, leg­is­la­tors, and courts in the mort­gage assign­ment and mort­gage fore­clo­sure processes have fos­tered an envi­ron­ment where mortgage-related lit­i­ga­tion has expanded on all fronts,” said Antony Laura, a part­ner in the Pat­ton Boggs Newark office.

“While the increase in ser­vic­ing cases is stark, the increase in suits by investors alleg­ing mis­steps in the orig­i­na­tion and secu­ri­ti­za­tion process is espe­cially worth not­ing, as hun­dreds of mil­lions of dol­lars are often at stake in those loan port­fo­lio repur­chase cases,” Laura explained.