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Our Thoughts
The financial press is full of stories about the “collapse” of the subprime mortgage market, what caused this “collapse” and who should bear the blame. Members of our group are often quoted in those stories (see those stories). Subprime mortgage loans are, as the name indicates, loans made to less credit-worthy borrowers which have a greater risk of default than “conventional” mortgages and hence carry a higher interest rate. Wall Street Underwriters and the business teams they assembled played a critical role in the boom of subprime mortgage loans that were made in the last several years.
An undeniable fact in the current subprime loan crisis is that, as more individual homeowners default on their home mortgages, an increasing number of investments, which rely on payments from those mortgages, will fail. The magnitude of investment losses from this crisis is currently incalculable as this multifaceted travesty unfolds. Certainly, investors will lose billions. Losses from subprime mortgages will surface in a number of investments portfolios including: pension plans, governmental agencies, insurance companies, non-profit charitable organizations and mutual funds. Many fixed income investments which rely heavily on mortgages to pay their investment obligations are at significant risk of investment losses.
In evaluating potential liability to investors by Wall Street Underwriters and/or Rating Agencies, it appears that the most viable claims to be asserted would focus on: (a) the adequacy of the disclosures that were provided to investors; (b) the adequacy of the ratings, by the Rating Agencies, on the investment created by subprime, exotic and high risk loans; (c) the valuations and appraisals, and systems therefore, of the underlying mortgages by the investment banks and/or the rating agencies during the “due diligence” and structuring phases of the investment; (d) the conflicted position of the Rating Agencies and the evaluation models that were utilized for both the initial formulation of their ratings and the subsequent monitoring of the same; (e) the business practices and procedures implemented by the Wall Street Underwriters, and reviewed by the Rating Agencies, in creating the pipeline for the subprime and high risk collateral utilized in creating Structured investment vehicles.
In the summer of 2007, our group, who individually and collectively have extensive experience in representing investors against Wall Street, formed an affiliation. Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage related investment losses. Contact us.
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