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Subprime Problems Boost Securities Class-Action Suits

Posted Dec 21, 2007 7:38 AM CDT
By Debra Cassens Weiss

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The subprime mortgage debacle is fueling an increase in shareholder class-action lawsuits.

Two reports have reached that conclusion, despite some differences in the numbers reported.

The New York Times reports that 198 class actions were filed through Dec. 15, an increase of 58 percent over last year, citing a study of shareholder class actions to be released today by the NERA Economic Consulting company.

The Wall Street Journal, on the other hand, reports that 166 securities class actions were filed on behalf of investors this year, a one-year increase of 43 percent. The newspaper (sub. req.) cites a study by Stanford Law School and Cornerstone Research to be released in January.

The New York Times says 38 lawsuits were securities class actions related to subprime losses, while the Wall Street Journal puts the number of subprime suits at 32.

A summary of the NERA report says that settlements resolving shareholder class actions in 2007 paid an average of $33.2 million, up nearly 50 percent from 2006, and a median of just under $10 million.

Most of the subprime suits contend mortgage companies and lenders overstated the value of their mortgage portfolios and failed to disclose overvalued property appraisals, the WSJ story says.

Despite the one-year increase in class actions, the number of such suits is still below highs of the late 1990s.

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