Mortgage Litigation Rises, According To Report

DALLAS -- A surge in legal actions tied to foreclosures and investors-related cases helped push the Mortgage Litigation Index to an all-time high during the first quarter. Criminal cases more than doubled and mortgage insurance is emerging as an area of growing litigation.

Active cases from Jan. 1 to March 31 totaled 155, according to the report, which reflects litigation covered by and is prepared in conjunction with Patton Boggs LLP, a leader in mortgage banking litigation. It was the highest quarter since the report was launched in 2007.

Litigation rose from 134 cases tracked in the prior quarter and just 81 cases a year earlier.

Fueling the increase were investor-related cases, which jumped to 38 from 18 three months prior. The increase in cases came as the Dow Jones Industrial Average briefly dipped below 10,000 during February.

Mortgage insurance cases increased to 24 from only four the previous quarter.

"Financial institutions, mortgage insurers, including the Federal Housing Administration and most holders of notes are scrutinizing loan files and looking for lender errors to deny claims," said Pat McManemin, a partner at Patton Boggs. "It's a similar situation with Fannie and Freddie -- both of which have been hitting seller servicers with repurchase demands. As the amounts in controversy become material to all parties involved, the law in this area, including the application of holder in due course principles, will be developed."

Lawsuits tied to mortgage-backed securities climbed to 26 cases, while criminal cases were up more than 100 percent to 24.

Foreclosure litigation nearly doubled -- to 33 actions. Much of this activity was criminal and the result of stepped-up efforts by state and federal regulators.

Lawsuits tied to mortgage-backed securities climbed to 26 cases, while criminal cases were up more than 100 percent to 24.

Q1     Q4
              Total    155     134
  Investor              38      18
  Foreclosure           33      17
  MBS                   26      17
  Criminal              24      11
  Insurance            24       4
 Read the full report at
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