Suits Follow Mortgage Meltdown
Posted Sep 11, 2007 12:23 PM CDT
By Debra Cassens Weiss
More than a dozen mortgage lenders are facing lawsuits over the subprime mortgage meltdown, and more suits are likely.
The Washington Post reports there is no shortage of potential defendants. Possible targets include home buyers who lied about their income, lenders that made bad loans, securities firms that packaged the loans into securities for investors, and credit agencies that graded the securities as safe investments.
One of the pending suits, filed by plaintiffs firm Labaton Sucharow, claims Countrywide Financial misled investors about its financial situation.
New York lawyer Steven Caruso told the Post he plans to file a suit on behalf of investors against Bear Stearns, which operated two hedge funds for subprime securities that collapsed this summer. He claims the funds failed to disclose material facts to investors.
Meanwhile California lawyer Dan Mulligan told CNNMoney.com that many suits will be filed against mortgage brokers for offering risky mortgages to home buyers. In some cases, brokers asked borrowers to sign blank pages and then filled in the blanks themselves to inflate the borrowers' stated income.
In Arizona, lawsuits alleging mortgage fraud are being filed against brokers, banks, appraisers and others involved in the home-buying process, the Arizona Republic reports.
Brooklyn Law School professor David Reiss told the Post to expect more suits and defendants. “You have an immense amount of litigation against an incredible range of parties,” he said. “Everybody can point fingers at so many other people that you just don't know when it'll stop."