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Legal fights over loan modifications, appraisals and foreclosures drove a 54 percent second-quarter spike in mortgage-related lawsuits, according to a joint analysis by MortgageDaily.com and Washington-based law firm Patton Boggs. The organizations’ joint Second Quarter “2009 Mortgage Litigation Report” tracked 125 active state and federal cases filed by regulators and private parties, compared to 81 active cases during the first quarter. This year’s first and second quarter activity totaled 206 cases, nearly matching last year’s 207 cases. Litigation spiked during the third quarter last year with 74 active cases, compared to case counts in the low-to-mid 40s range during the other three quarters. Lawsuits against mortgage modification firms, filed primarily by regulators, surfaced for the first time during the second quarter, with 22 cases compared to none during the first quarter or in 2008. The study tracked 11 appraisal lawsuits during the second quarter, compared to a handful during each of the three previous quarters. Foreclosure cases more than doubled to 26, up from a dozen during the first quarter. Shareholder lawsuits rose to 31 from 21 in the first quarter, but the study concluded that “third-quarter investor litigation appears to be easing” with the stock market rebound. According to the data and Patton Boggs’ experience, there appeared to be a direct correlation between an increase in legislative and regulatory activity and a pronounced upswing in litigation, said Pat McManemin, a Dallas-based business and litigation partner at Patton Boggs. “As industry members continue to survey the new landscape and navigate their way through implemenational and operational hurdles, issues will need to be litigated to clear up gray areas, and address grievances,” McManemin said. MortgageDaily.com is also tracking steadily climbing regulatory actions against financial institutions regarding their mortgage activities. It counted 180 actions during the first quarter, the most recent data available, compared to 164 during the fourth quarter of 2008 and 115 during the third quarter.

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