Wednesday, June 29, 2011

The Global Mortgage Crisis Litigation Fallout

[Author: William V. Rapp, New Jersey Institute of Technology]

In the aftermath of most bubble collapses a proliferation of scams and legal controversies emerge as investors realize their greed or naivete has been exploited legally and illegally (Kindleberger and Aliber 2005)¹. This naturally results in a surge in lawsuits as such investors try to recover some of their money from everyone involved in promoting and exploiting the rapid rise in asset prices. The current global financial crisis resulting from the Mortgage Meltdown has been no exception. This chapter will review some of these legal controversies by examining the recourse to the courts of two types of investors: one, investors in subprime mortgage vehicles and two, investors in banks and other lenders that lent and promoted such loans and securities and whose stock prices subsequently declined dramatically or became worthless. The analysis includes an assessment of which suits appear to have the best chance of success and those that have ended in frustration. This review is also an excellent way to understand how the bubble developed and how some investors became involved directly or indirectly in the Bubble’s evolution and ultimate collapse.

Click here to download the complete paper.

¹ See Kindleberger, C. and Aliber, R. (2005), Manias, Panics, and Crashes. John Wiley. Chapter 9, “Frauds, Swindles and the Credit Cycle”, 143-175.

2 comments:

  1. That was a very comprehensive and intelligible review. I'm planning to get a Long Island mortgage and this review has helped me understand mortgage more.

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  2. Interesting thesis on the recent global mortgage crisis. I did wonder if all of these factors contributed into making the Long Island mortgage rates.

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