Mortgage Litigation Reaches All-Time High: Report
04/09/2012 By: Esther Cho
Mortgages are becoming more and more of a litigious matter, with the number of mortgage-related cases reaching an all-time high, according to Mortgage Daily’s 2011 fourth quarter Mortgage Litigation Index, which first began in 2007.
At 244 cases, the number rose from 218 in the 2011 third quarter and from 151 cases during the 2010 fourth quarter.
Foreclosure-related litigation cases, which include servicer-related litigation, foreclosure lawsuits, and cases against foreclosure rescue services, reached 99 and accounted for 40 percent of the total.
“These numbers are a reflection of both a high volume of foreclosures and a high level of awareness among borrowers that foreclosure-related issues can be litigated, sometimes successfully,” said Christopher Willis, author of the white paper on the index and an Atlanta-based partner in Ballard Spahr’s Consumer Financial Services Group.
At 244 cases, the number rose from 218 in the 2011 third quarter and from 151 cases during the 2010 fourth quarter.
Foreclosure-related litigation cases, which include servicer-related litigation, foreclosure lawsuits, and cases against foreclosure rescue services, reached 99 and accounted for 40 percent of the total.
“These numbers are a reflection of both a high volume of foreclosures and a high level of awareness among borrowers that foreclosure-related issues can be litigated, sometimes successfully,” said Christopher Willis, author of the white paper on the index and an Atlanta-based partner in Ballard Spahr’s Consumer Financial Services Group.
The number of criminal cases jumped from 34 during the 2011 third quarter to 57 in the following fourth quarter.
“While the majority of these cases involved the alleged actions of individuals involved in frauds such as Ponzi schemes and foreclosure rescue scams, there were notable criminal indictments for alleged “robo-signing” beginning at the end of 2011,” said Willis.
Cases involving mortgage-servicing increased from 51 cases during the previous quarter to 70 cases.
Fee lawsuits, which involve excessive fees collected at origination, servicing fees, loan fees that exceed state maximums, and fees to county recorders, posted an all-time record number, along with title cases, which include issues with property title and title insurance claims. Fee cases jumped to 17 this quarter compared to 2 cases during the previous quarter, and title rose to 46 from 31 during the third quarter, and 6 from the second.
According to Willis, the increases reflect the large numbers of cases challenging MERS.
With these increases, mortgage-related lawsuits are not expected to decline. Willis cites several reasons for the projection.
“In particular, the publicity surrounding the multi-state settlement, together with publicity surrounding other aspects of mortgage litigation, tends to stimulate borrowers and their counsel to assert claims against mortgage servicers,” said Willis. “This publicity, coupled with the continuing high rate of foreclosures, suggests that the current level of mortgage-related litigation can be expected to remain stable, if not continue to increase.”
“While the majority of these cases involved the alleged actions of individuals involved in frauds such as Ponzi schemes and foreclosure rescue scams, there were notable criminal indictments for alleged “robo-signing” beginning at the end of 2011,” said Willis.
Cases involving mortgage-servicing increased from 51 cases during the previous quarter to 70 cases.
Fee lawsuits, which involve excessive fees collected at origination, servicing fees, loan fees that exceed state maximums, and fees to county recorders, posted an all-time record number, along with title cases, which include issues with property title and title insurance claims. Fee cases jumped to 17 this quarter compared to 2 cases during the previous quarter, and title rose to 46 from 31 during the third quarter, and 6 from the second.
According to Willis, the increases reflect the large numbers of cases challenging MERS.
With these increases, mortgage-related lawsuits are not expected to decline. Willis cites several reasons for the projection.
“In particular, the publicity surrounding the multi-state settlement, together with publicity surrounding other aspects of mortgage litigation, tends to stimulate borrowers and their counsel to assert claims against mortgage servicers,” said Willis. “This publicity, coupled with the continuing high rate of foreclosures, suggests that the current level of mortgage-related litigation can be expected to remain stable, if not continue to increase.”
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