Newest Navigant Study Released: Shows Unprecedented Volume of Credit Crisis Litigation

Navigant Consulting, Inc. (NCI), a global consulting firm that releases quarterly reports on subprime mortgage and related case filings in the federal courts, released their newest study today, and the results are staggering (see MSN Money article here).

The report, entitled Third Quarter 2008 Update: Breaking New Ground, shows an unprecedented volume of cases stemming from the subprime mortgage crisis and related financial crises. Since January 1, 2007, 742 subprime mortgage-related cases have been filed in the federal courts, far exceeding the total number of cases arising out of the Savings and Loan crisis of the 1990s (which, at 559 cases, stood as the previous high-water mark for litigation stemming from a major financial crisis).
The report also shows an alarming rate of increase in case filings over the last year, a trend that promises to become more pronounced as economic conditions continue to worsen. The number of subprime-related case filings in the first three quarters of 2008 alone (448) already exceeds the total for all of 2007 (294) by over 52%!
The report also breaks down the categories of lawsuits, and notes a downward trend in the number of borrower class actions (which had been the previous leading category), while the number of securities lawsuits, contract disputes and investor actions increased sharply.
It’s important to keep in mind that the Navigant reports only track the cases filed in federal court, meaning the total litigation impact of the subprime crisis is much greater. Many times more subprime-related cases, such as contract disputes and misrepresentation actions, have been brought in state court over the last 21 months. Also, we can expect to see these filings increase as a result of, not just worsening market conditions, but the increased success of completed and existing suits (see prior posting here). As discussed previously, with the emergence of more details about the economic causes of the crisis and the unchecked lending culture that fueled this meltdown, the prospects of recovering subprime-related losses through litigation will only improve.
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