There have been widely publicized reports of variuos lawsuits against lenders and most have valid, legitimate claims. There was Robo signer, MERS, and numerous actions in state in federal courts. The statistics are alarming and I believe that this is only the beginning. During the fourth quarter of 2010 mortgage servicers faced a 42 percent rise in lawsuits over the preceding months. Interestingly, however, these suits were not, for the most part, related to unwinding foreclosures due to robo-signed affidavits, but instead dealt with failures in the loan modification process. Additionally, many mortgage servicers faced lawsuits from investors thanks to problems with mortgage-backed securities. Experts like Antony Laura, a partner in the Patton Boggs mortgage banking law firm office in Newark, New Jersey, attribute the rise in litigation to “an environment where mortgage related litigation has expanded on all fronts” thanks to highly publicized inquiries from state attorneys general and the demand for transparency in the presently-murky foreclosure process.
While the increase in mortgage litigation overall is disturbing, Laura believes that investor lawsuits are likely to create the biggest problems for mortgage servicers because the stakes are so high in this type of litigation. “The increase in suits by investors alleging missteps in the origination and securitization process is especially worth noting,” he said, “as hundreds of millions of dollars are often at stake in those loan portfolio repurchase cases.”