In the period from 2004 to 2006, amid rising home prices, low interest rates and a brutally competitive business environment, mortgage lenders desperate for market share began writing subprime loans in unprecedented volume.
The declining lending standards fueled by these unique conditions were, for a time, concealed by an unsustainable housing bubble, which burst in the spring and summer of 2007 as rising interest rates coincided with falling home prices. Rising defaults on these loans led to a wide ranging credit and liquidity crisis in the global capital markets, the effects of which are still working through the U.S. housing market and the overall economy.
BLB&G's Subprime Litigation Group represents investors and individuals who were harmed by the fraudulent or abusive practices of the many players in the mortgage arena: (i) the mortgage lenders -- subprime and others; (ii) the investment banks that packaged and sold mortgage backed securities and derivative instruments; (iii) the bond rating agencies; and (iv) the asset managers who purchased high risk and inappropriate securities on behalf of investors. While the scope of the misconduct by these and other industry participants is still being revealed, investors have already recognized billions of dollars in losses and thousands of homeowners face foreclosure. Our concerns and cases focus on four areas of litigation:
Securities Fraud. BLB&G is currently lead counsel representing investors in securities fraud cases against subprime lenders New Century Financial Corporation and Accredited Home Lenders Holding Company. The Firm also represents institutional investors in securities actions against American Home Mortgage Investment Corporation and Fremont General Corporation. The common themes among the cases are that lenders (i) artificially inflated their earnings through unsupportable assumptions regarding likely defaults and loan repurchase requirements; (ii) falsely represented that lending standards were not compromised; and (iii) falsely forecasted rosy future earnings amid declining home prices, record breaking levels of defaults and delinquencies and a saturated lending market. The Firm is also advising investors in other companies such as publicly traded investment banks and mortgage issues that incurred massive losses as a result of undisclosed exposure to subprime loans, including mortgage insurers and investment banks that concealed billions of dollars in liabilities tied to mortgage-backed securities.
Improper Investment Advice. BLB&G represents individual and institutional investors in cases against financial advisors and money managers that knowingly and improperly invested client assets in high-risk instruments tied to subprime mortgages. These include subprime mortgage-backed securities, collateralized debt obligations and other derivatives, and investments in such instruments predicated upon undisclosed or inappropriate levels of leverage. The Firm currently represents ERISA plans that invested in bond funds managed by State Street Bank and State Street Global Advisors (Unisystems, Inc. Employees Profit Sharing Plan v. State Street Bank and Trust Company et al.) and is advising other investors whose assets may also have been improperly placed in high-risk instruments impacted by the subprime collapse.
Mortgage-Backed Securities. The Firm represents numerous institutions that invested directly in mortgage-backed securities (MBS) and derivatives thereof (such as CDOs). As it becomes increasingly apparent that the risk inherent in such instruments was never adequately disclosed, BLB&G is investigating claims on behalf of investors in such MBS and CDOs.
Consumer Fraud and Predatory Lending. BLB&G is investigating the practices of subprime and other mortgage lenders that have resulted in thousands of foreclosures of homes of low income homeowners, particularly minority homeowners. The Firm has extensive experience in this area, having successfully prosecuted class action cases against lenders who have exhibited a variety of fraudulent and discriminatory practices with borrowers including failure to disclose loan fees, misrepresentation or failure to disclose loan terms (particularly the potential effect of rate resets on adjustable rate loans), steering better qualified clients to expensive loan alternatives and charging excessive interest rates. BLB&G has extensive experience prosecuting such predatory lending practices.
BLB&G's Subprime Litigation Group has remained on the forefront of this emerging area, as the full scope of the subprime debacle and its broad impact on investors and consumers was revealed. Our broad experience in all aspects of subprime litigation makes us uniquely suited to prosecute all mortgage and structured finance related claims before federal and state courts.