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WASHINGTON � The number of subprime-related cases filed in federal courts is increasing dramatically, according to a new report, nearly doubling during the second half of 2007 and with 43% being borrower class actions. Navigant Consulting, a specialized international consulting firm, conducted an in-depth analysis of the subprime mortgage and related civil litigation filed in federal court during 2007. It identified 278 such cases filed during 2007, of which 65% were filed during the year’s final six months. “While our list may not be exhaustive, we believe it presents an accurate picture of the nature and volume of this rapidly emerging area of litigation,” said the report. The number of subprime-related cases climbed from 97 in the first half of the year to 181. Navigant groups the cases into six major categories. “While we observed a meaningful number of filings in each category, borrower class actions dominated, making up 43% of the total,” said the report. The most common sub-categories among the borrower class actions, according to the report, are matters focused on inadequate disclosure involving a specific product type � option ARMs � and cases alleging discriminatory lending practices, particularly as it relates to mortgage pricing. Each of the top 10 subprime mortgage lenders for 2006 was named in at least one borrower class action suit during 2007. Other major categories included: • securities cases (22%) � of which 54% were securities fraud class actions alleging temporary inflation in a company’s stock price due to inaccurate or incomplete disclosures to shareholders. The remaining securities cases targeted either underwriting firms for allegedly making material misrepresentations in connection with the issuance of mortgage-related securities or investment managers who are alleged to have taken imprudent risks and/or to have misled investors in managing client portfolios. • commercial contract disputes (22%) � with the majority (58 percent) involving litigation seeking to force mortgage originators to repurchase loans that went into early default or otherwise violated certain representations and warranties made at the time of sale. • employment class actions (9%) • bankruptcy-related and other (4%) Using litigation during the 1990s savings-and-loan crisis as a benchmark, Navigant reported that subprime cases filed in federal court in 2007 already equal one-half of the total 559 actions handled by the Resolution Trust Corp. over a multiple-year period. The survey did not include any state court lawsuits, nor lawsuits by lenders, leading some commentators to suggest that conclusions about the scope of litigation so far are necessarily understated.

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