US subprime lawsuits pick up steam in 2008--study

By Martha Graybow

NEW YORK, April 23 (Reuters) - The pace of U.S. litigation stemming from the subprime mortgage meltdown picked up in the first quarter, with new cases brought at a rate of nearly two cases a day, a study released on Wednesday found.

The report said there were 170 subprime-related civil cases filed in federal courts in the first three months of 2008, which translates into almost two cases a day including weekends. In comparison, there were 278 subprime lawsuits brought in all of 2007 in federal courts.

This year, the litigation "really hit with tsunami force," said Jeff Nielsen, managing director of Navigant Consulting Inc (NCI.N: Quote, Profile, Research), a financial services and litigation consulting group that conducted the study. "If you look back at 2007, by comparison, that was a mild breaking wave."

Since the beginning of 2007, the number of subprime-related cases brought against lenders, banks, home builders and other defendants totaled 448 through the end of March, Navigant said. Eighty-six percent of those cases were active as of March 31, meaning that the litigation could drag on for years.

Even more cases have been brought in state courts, which were not tracked as part of this study.

In an earlier report, Navigant projected that lawsuits stemming from the mortgage crisis were on pace to surpass the number of cases from the savings-and-loan meltdown of the late 1980s and early 1990s, when there were 559 legal actions.

"We're very quickly closing in on that number," Nielsen said on Wednesday.

Forty-six percent of the subprime cases filed in the first quarter were from borrowers seeking class-action status, such as lawsuits accusing lenders of inadequate disclosure of loan terms.