Subprime crisis lawsuits hit unprecedented levels

by David Masters

Story link: Subprime crisis lawsuits hit unprecedented levels

America’s subprime mortgage crisis has reached an unprecedented level according to a report released this week.

Navigant Consulting reveal in a report that more federal lawsuits have been filed as a result of subprime mortgages than were filed during the savings and loans (S&L) crisis of the 1980s and 90s.

S&L lawsuits in the early 1990s totalled 559.

For the 18-months ending 30th June 2008, federal courts filed 607 subprime-related cases. Over half of these were filed during the first six months of 2008.

In the second quarter of 2008, more than three new cases were filed for every one case dismissed or settled.

Certain types of litigation began to slow down in the second quarter, such as new borrower lawsuits related to subprime mortgages seeking class-action status.

However, more litigation could emerge due to the recent rise in banks collapsing.

Financial services and litigation consultants Navigant conclude in the report that the number of legal cases is of ‘little surprise’ given that the scale of the current credit crisis is ‘unprecedented’.

Jeff Nielsen, Navigant’s leader of Financial Services Disputes, added that a lesson learned from the S&L debacle was that even after an economy has recovered from financial crisis, court cases and legal ramifications can go on for years.