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Subprime lawsuits on pace to top S&L cases

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Reuters / February 15, 2008

NEW YORK - Lawsuits stemming from the US subprime mortgage debacle already are on pace to surpass the number of cases that grew out of the savings and loan meltdown of the late 1980s and early 1990s, a study has found.

Borrowers, investors, and other plaintiffs filed 278 civil lawsuits in federal courts related to subprime lending in 2007, and the trend is expected to continue this year, according to the report released yesterday.

Last year's subprime tally was equal to about half of the 559 legal actions brought over a multiple-year period following the savings and loan crisis, according to the report by Navigant Consulting Inc. The subprime fallout has frequently been compared with that of the S&L crisis, which cost the government more than $100 billion.

"The S&L crisis has been a high-water mark in terms of the litigation fallout of a major financial crisis," said Jeff Nielsen, managing director of Navigant, which provides business, regulatory, and financial advisory services. "The subprime-related cases appear on their way to eclipsing that benchmark."

The 559 legal actions that were related to the S&L crisis encompass lawsuits handled by the Resolution Trust Corp, an agency created in 1989.

Navigant only tracked subprime lawsuits filed in federal courts for the study. Many more cases have been brought in state courts.

The study found that 43 percent of the cases were class actions brought by borrowers, such as those that contended they were victims of discriminatory lending practices.

Other cases include securities lawsuits filed by investors, commercial contract disputes, employment class actions, and bankruptcy-related cases.

Defendants included mortgage bankers, brokers, lenders, appraisers, title companies, home builders, servicers, issuers, underwriters, bond insurers, money managers, public accounting firms, and company boards and officers.

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