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As housing market slumps, subprime suits skyrocket

It looks like all those law firms carving out subprime practice niches had the right idea.

A new report suggests that subprime-related lawsuits are outpacing litigation involving the saving and loan fallout of the 1990s.

According to a story in Corporate Counsel (via the ABA Journal) a new study by Navigant Consulting Inc. counted 448 subprime related lawsuits filed in a 15-month period from the beginning of 2007 to the spring of 2008. Compare that to 559 S&L related suits in a six year period from the late 1980s to the mid-1990s.

“What we saw in 2007 was a mild breaking wave compared to the tsunami we’re witnessing now,” Navigant managing director Jeff Nielsen told Corporate Counsel. “In the most recent quarter, we’re looking at approximately two filings per day, including weekends.”

About 86 percent of the subprime cases tracked by the Navigant study are still active, he said.

In other news: Sox and subprime

The pause in the busy oral argument schedule at the Supreme Court gives DC Dicta a chance to catch up on news from across the street at the Capitol, and from across town at the White House. As a member of Red Sox Nation (it’s ok, we root for the Nats too!) the appearance by Big Papi, Jason Varitek and the rest of the World Champion team at the White House was the big news of the week for us. But there is actual legal news to get to as well:

After advisors to President Bush on Tuesday urged the veto of a bill aimed at curbing the subprime-fueled mortgage meltdown by changing bankruptcy law, Senate Majority Leader Harry Reid urged Bush to work with Democratic lawmakers to pass the “The Foreclosure Prevention Act.”

The proposed bankruptcy law change in the bill has drawn opposition not only from the White House, but also the banking industry, which has lobbied Congress hard to drop the language.

But in a letter to the president regarding the advisors’ opinion, Reid urged Bush to “to reject their advice and work with us to enact legislation that will address the housing crisis facing millions of American families.”

Addressing the bankruptcy law provision, Reid wrote:

“We understand your advisors specifically expressed concern about Title IV of the bill, which would change federal bankruptcy law to allow judges to modify mortgages on primary residences. Current law allows bankruptcy judges to assist individuals who are unable to fully meet almost any type of obligation – including loans for luxury yachts or vacation homes – yet it prohibits similar assistance for those struggling to stay in their own homes. That makes no sense, particularly during an economic crisis that avoiding foreclosures could help mitigate.”

Earlier in the day, at an event with other Senate Democrats and civil rights leaders to discuss the impact of the mortgage crisis on African American communities, Reid also pushed for passage of the bill, and blamed Republicans for stalling it. “Democrats are committed to addressing the housing crisis and to helping families threatened with foreclosure stay in their homes – it is the right thing to do for struggling homeowners and the right thing to keep communities afloat,” Reid said. “We are asking for Republicans to work with us.”

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