MBS Cases Drive Q3 Mortgage Litigation: Study

A surge in suits involving mortgage-backed securities propelled litigation cases for mortgage servicers to 218 over the third quarter last year, according to a recent index.

[IMAGE]

""MortgageDaily.com"":http://www.mortgagedaily.com/LitigationIndex3Q010912.asp unveiled a pickup in the number of court cases nationally by releasing the _Third Quarter 2011 Mortgage Litigation Index_ Monday. The Web site came up with figures in collaboration with law firm ""Patton Boggs LLP"":http://www.pattonboggs.com/.

Mortgage-backed securities litigation rose by 36 cases over the third quarter, up from 26 seen from the last quarter and just 12 in the third quarter 2010.

[COLUMN_BREAK]

""The increase in MBS litigation is partly driven by statutes of limitations on investors' claims,"" ""Patrick McManemin"":http://www.pattonboggs.com/pmcmanemin/, a partner with Patton Boggs, said in a statement.

Notable cases saw states and prosecutors in litigation against companies like Bank of America, Credit Suisse Securities, and Wells Fargo, with the former racking up a list of cases over bad securities involving now-defunct Countrywide Financial Corp.

""State claims against originators for alleged mishandling of portfolios, inadequate underwriting practices and misrepresentations regarding loan quality on the part of private and GSE litigants can only be preserved by filing lawsuits before claims expire,"" he added.

Foreclosure-related suits also went up from 67 in the second quarter to 90 in the third quarter, followed shortly by litigation from investors, which leapt from 50 to 82 over the same time frame.

Criminal cases related to mortgage fraud ranked lowest with fewest new cases, as individual cases fell from 44 to 34 over the same time frame.

Also in the fray: Litigation involving false advertising claims, compliance issues, reportedly excessive fees, and property titles and title insurance claims.