LAWFUEL – The Legal Newswire – The mortgage company shakeout has lead to a mounting array of legal claims, reports the NY Law Journal.
Shareholders in bankrupt mortgage lending companies have filed lawsuits, as have mortgage borrowers and investors in mortgage-backed securities. Warehouse lenders (companies that provide interim financing until a mortgage is sold to a permanent investor) and an investor in a credit rating agency have also stated various claims.
The Federal Reserve System last week pumped $38 billion dollars into the banking sector to help ease the strain on the economy. But local attorneys said this would not be enough to stem the litigation tide.
“It is early in the game to predict what type of litigation will be filed,” said Laurence Rosen, a partner at The Rosen Law Firm in Manhattan.
However, “given the size of the losses, there won’t be any lack of targets” to sue, said Philip R. Forlenza, a senior litigation partner at Patterson Belknap Webb & Tyler.
Patterson Belknap is one of several law firms recently to have announced the formation of an interdisciplinary subprime mortgage practice team.
On Aug. 2, Mr. Rosen’s firm filed a securities fraud class action against American Home Mortgage Investment and the company’s chief financial officer and chief executive officer and president, alleging violations by the Melville, N.Y., mortgage lender of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 following the company’s filing for bankruptcy earlier this month.
In Ramos v. American Home Mortgage, 07-CV-3191, investor James Ramos, individually and on behalf of thousands of other potential investors, alleged that the company did not disclose that it was experiencing an “increasing level of loan delinquencies which was depressing its earnings; that the Company was experiencing increasing difficulties in selling its loans and therefore, was required to decrease prices, thereby reducing margins and profits; and [that] the Company was overstating its financial results by failing to write down the value of certain of the loans in its portfolio as these loans had declined substantially in value.”
