Friday, February 15, 2008

Mortgage Market Mess Inspires Lawsuits

Who is to blame for the losses paining Wall Street and homeowners?
Lawsuits are being filed over the troubled mortgage market and the rest of the financial world. Homeowners are suing mortgage lenders. Mortgage lenders are suing Wall Street banks. Wall Street banks are suing loan specialists. Investors are suing whomever they can blame.
The legal and regulatory complications could limit the ones that followed the technology-stock bust and the Enron and WorldCom debacles. The size and complexity of the modern mortgage market will make untangling the latest mess very tricky.
Homeowners and subprime mortgage lenders are squaring off in cases that claim that some lenders engaged in predatory lending practices and other wrongdoing.
Two questions lie at the heart of some of the cases. The first is whether lenders and investment banks alerted borrowers and investors to the risks posed by subprime loans or securities backed by them. The second is how much they were legally obliged to disclose.
As defaults and foreclosures rise, the players in the housing market are pointing fingers at each other.

Everybody blames everybody else.
Wall Street banks that sold mortgage investments around the world face legal complaints from as far away as Australia and Norway. In most cases, the lenders are fighting the allegations.
Securities lawyers say cases involving mortgage-backed securities, which generally were sold privately to sophisticated institutional investors, are far more complicated than those involving stocks, which were sold publicly to everyday investors.

Posted by Harrison K. Long, Explore Properties Group, Feb. 15, 2008.
[Source New York Times, Feb 8, 2008]


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