Subprime Mortgage Crisis
Peter Marchel J.D., M.B.A., CPU
As of February 2008 Between 191 – 278 lawsuits filed
Litigation expected to arise from three sources:
1. Investors who have sustained investment loses 2. Contracting parties who did not receive promised contractual benefits 3. Customer or clients who were disappointed in the professional services they received from a provider of such services
Subprime related claims categories
• Claims relating to the purchase of residential real estate secured by subprime mortgage loans
– Individual home purchaser lawsuits or class actions – Claims by mortgage insures against subprime lenders – Criminal or regulatory actions
Subprime related claims categories
• Claims relating to the Sale of securities secured by subprime mortgage debt
– Claims against plan fiduciaries – Claims against investment advisors by their clients – Claims against public companies with substantial subprime securities holdings – Claims against hedge fund advisors by investors
D&O vs. E&O Claim
• When did insured become aware of potential claim? • What conduct was the insured engaged in?
– – – – – Sales practices Lending practices Property valuation Wavier of financial requirements Misrepresentations
D&O vs. E&O Claim
• • • • Regulatory or Criminal investigation? Repayment of fees or unwinding of transaction Enforcement of alleged contractual obligation? Punitive or treble damages being sought by plaintiff
D&O vs. E&O Claim
• So what does all this mean?