Foreclosure gate: here come the class-action suits

Earlier I had written on the fact that banks may be foreclosing in a manner which will cause problems down the road. Today Reuters published an overview of the suits that banks are starting to disclose. The suits are coming from two directions: Firstly, obviously from homeowners who are now, either singly or in class-action, taking the banks to task on trying to foreclose with improper or even fraudulent paperwork. And, secondly from the buyers of Mortgage Backed Securities (MBS), often big brokerages or banks themselves who argue that the securities they bought were based on incomplete or fraudulent disclosure. I.e. the banks selling them did NOT have clear title to the loans that they bundled into them since the paperwork was a mess.

All of which just means a lot of work for the judges and the lawyers over the next few years. And uncertainty in the financial companies’ stock prices as the impact of the suits is made clear over time. The Reuters document noted that bank stocks dropped today.