Mortgage Litigation Index Down Despite Foreclosure Deterioration

Mar 25, 2013, 07:00 ET from Mortgage Daily

DALLAS, March 25, 2013 /PRNewswire/ -- Fewer actions tied to employment and compliance helped reduce overall mortgage litigation activity. But activity is expected to remain elevated above historical levels as foreclosure, investor and regulatory litigation persists.

The fourth quarter had activity on 223 cases tracked by Mortgage Daily for its Mortgage Litigation Index. The cases were deemed significant by Mortgage Daily's editorial staff and had activity in the fourth quarter. Settlements were included in the actions as were complaints, rulings and appeals filed in federal and local courts.

After peaking at 264 in the second-quarter 2012, the index fell two consecutive quarters.

Caseload was a little lighter than 231 tracked in the third-quarter 2012 and slower than 244 in the fourth-quarter 2011.

The latest decline was aided by employment cases, which fell to a 10-quarter low.

Foreclosure-related cases climbed to 120 -- the highest since the Mortgage Litigation Index launched in 2007.

An accompanying white paper authored by Ballard Spahr LLP Partner Christopher Willis discusses the foreclosure trend.

"The data suggests that foreclosure activity is converting into litigation at a higher rate than previously existed, and we suspect that the accumulated weight of continued publicity, governmental enforcement actions, and evolving theories of liability for mortgage servicers are all contributing to this trend," Willis wrote. "This means that, even though mortgage delinquencies and foreclosure numbers are moving in a lower direction, the level of foreclosure- and delinquency-spawned litigation may continue to persist at its current high levels."

Cases involving loan modifications were the most in seven quarters.

Investor litigation, at a five-quarter high, is forecasted to remain significant into this year.

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Willis observed that regulators "continue to be very active in bringing mortgage-related enforcement actions."

He sees no return to a normal level of mortgage litigation for the foreseeable future.

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