Driven by legal actions against mortgage modification firms, overall mortgage litigation hit its highest level yet during the fourth quarter of 2009, according a recent report on PRNewswire.
In conjunction with Patton Boggs, LLP, a provider of mortgage banking litigation, Mortgagedaily.com created its Fourth Quarter Mortgage Litigation Index, based on active cases covered by the Web site from October 1 through December 31, 2009.
During this period, 134 mortgage-related lawsuits were tracked, up from 76 cases documented during the third quarter of 2009. Mortgagedaily.com said this was the
highest quarter on record since it began tracking mortgage litigation in 2007. The driving force behind this increase was loan modification cases, which more than doubled from the third quarter.
""State and federal agencies are aggressively cracking down on modification scammers with severe criminal and civil penalties,"" said Patrick McManemin, a partner in the Dallas office of Patton Boggs. ""The upward trend in related fraud litigation is likely to continue.""
Mortgage-backed securities lawsuits soared in the fourth quarter, more than 300 percent higher than the third quarter 2009 and a year earlier, and foreclosure lawsuits were up 70 percent from the prior quarter and more than quadrupled from the fourth quarter of 2008. Furthermore, mortgage fraud litigation tripled from the third quarter and doubled from 2008, Mortgagedaily.com said.
On the civil side, McManemin said repo claims and mortgage insurance rejections continue to dominate the landscape, as more institutions are forced to recognize losses and deal with balance sheet issues arising out of defaults. He said industry participants should stay abreast of related legislation, paying close attention to states enacting laws that impose licensing requirements on third-party modification companies.