Unending Lawsuits After The Housing Market Collapse

By Author: Nick Adama
Total Articles: 197
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As is the American tradition, one of the hallmarks of our culture and an activity a majority of the population engages in at one time or another, as soon as the housing bubble burst, the lawsuits began. Homeowners sued loan originators and Realtors, investment firms sued originators under buyback agreements, and everyone else sued as many people as they could. After all, everyone is entitled to utilize the courts, right?

The number of parties bringing lawsuits against each other for various aspects of mortgage fraud, combined with the already high foreclosure rates, has put a strain on government court systems across the country. Even in the best of times, the judicial system in America has been more concerned with preserving the myths of state power and awarding the rich with more judgments against the poor.

With the bursting of the real estate bubble, though, a number of parties involved in the inflation by fraud have entered the courts in an attempt to seek "justice," also known as trying to avoid any consequences of their poor financial decisions over the past decade. And with the complicated mortgage and real ...
... estate contracts, securitization documents, and buyback agreements, these lawsuits will put an even larger burden on local courts.

For instance, investors in toxic mortgage securities have begun suing the loan origination companies and lenders. The investors are stating that the originators should have made them aware that these subprime mortgages were more likely to default. The lenders, according to these lawsuits, failed to disclose the true risk of the assets. The problem with these suits is that so many originators have gone out of business by now.

Another lawsuit that has increased in popularity since the collapse of the housing bubble has been the investors in securitized debt against the Wall Street investment firms that bought the loans and then turned them into mortgage backed securities. Wall Street knew, say the investors, that the mortgage were junk and this should have been disclosed.

The investment firms also took the highest interest rate tranches of the securities. In essence, they sold investors payouts based on lower interest rates and kept the higher rates for themselves. But the low rates were part of the perception that the investments were safer than they really proved to be over time as the underlying loans went bad.

Local governments have also begun initiating lawsuits in local government courts (conflict of interest? ) against mortgage companies. The governments are alleging that they have been damaged by the pumping and dumping of their communities. They were obviously relying on the pumping of real estate loans to continue to fund higher tax rates, and the decline in home values has created massive problems of funding programs.

These few examples of lawsuits do not even begin to examine the numerous suits involving homeowners themselves, who are both being sued by banks and suing them for fraud, predatory lending, or initiating class action suits. But the government courts have become the arena in which many players in the real estate bubble have turned to in order to prevent losing even more as a result of the collapse.
Nick publishes articles on the ForeclosureFish website to provide foreclosure help and information to borrowers in need of assistance. The site examines numerous methods to save a home, including deed in lieu of foreclosure, filing bankruptcy, short sales, fighting foreclosure in court, and others. Visit the site for an e-book explaining the basics of foreclosure and how to stop the process: http://www.foreclosurefish.com/