The subprime mortgage crisis is leading many to the courthouse steps. Lawsuits are arriving in myriad forms against a multitude of companies. More litigation is sure to come. In the meantime, the following is a survey of the types of lawsuits being filed in the subprime fallout.
- Homeowners Against Mortgage Lenders. Homeowners have sued mortgage lenders, alleging that the lenders engaged in predatory lending practices.
- Homeowners Against Homebuilders, Appraisers and Realtors.Homeowners have also sued homebuilders, realtors and appraisers, alleging that they inflated the valuation of homes.
- Investors Against Ratings Agencies. Investors have sued ratings agencies, alleging that the agencies assigned excessively high credit ratings to mortgage-backed securities.
- Investors Against Home Builders. Shareholders in home building companies have initiated class actions, alleging that the companies misrepresented their business prospects, thereby artificially inflating the price of company shares.
- Banks Against Mortgage Lenders and Brokers. Wall Street Banks have sued mortgage lenders and brokers, alleging that they sold the banks risky loans, after inflating both borrower incomes and home appraisal values.
- Mortgage Insurers Against Mortgage Lenders. At least one mortgage insurance company has sued a mortgage lender. The insurer alleges that the lender fraudulently misstated its underwriting standards, and then obtained insurance on its loans.
- Employees Against Their Employers. Employees of companies engaged in the subprime market have sued their employers, alleging breaches of fiduciary duties that led to huge losses to company retirement plans.
- Cities Against Banks and Mortgage Lenders. Cleveland and Baltimore have sued major banks and mortgage companies, alleging that they improperly pushed subprime mortgages, leading to foreclosures, abandoned homes, increased crime, and lost tax revenue.
- FBI Investigations. In addition, the FBI is investigating a range of financial services companies, including mortgage lenders, investment banks and developers. Among other potential violations of criminal law, the FBI is probing whether the companies engaged in accounting fraud and insider trading.