Subprime-Related Accusations Fly As Housing Slump Deepens
- Feb 11, 2008
An article in today’s Wall Street Journal discussed a wave of complaints against companies shareholders feel didn’t properly handle risk assessment during the subprime crisis.
They want reform; many of the companies want the shareholders to lay off. Some are trying to ward off a shareholder vote on any proposed resolutions to prevent risk issues in the future, according to the Journal.
The Laborers’ International Union of North America’s pension funds have sponsored many of the resolutions; they’ve asked companies including Merrill Lynch, Bank of America, Meritage Homes and builder Toll Brothers to provide more disclosure about CEO succession planning.
Whether or not the companies did adequately prepare, one thing is clear: The trust level between investor and company has been damaged–prompting the shareholders to feel they need to take action. And that’s not exclusive to one company or industry.
As the subprime fallout and housing decline continues, frustration is mounting–among homeowners, investors, employees: just about everybody. As a result, a number of lawsuits have cropped up relating to the mortgage industry, which further indicates the country’s collective anger level is rising.
Recent lawsuits have been filed by:
- Residents. Two Los Angeles couples filed a lawsuit last week claiming that Los Angeles builder KB Home and a unit of lender Countrywide
Financial rigged appraisals in their Sacramento, Calif.
development to raise home prices.
- An industry employee. An appraiser in
California filed a lawsuit against Washington Mutual in January, saying
she was blacklisted after refusing to mark a box on a report that would
have indicated area home prices were stable, the Wall Street Journal reported.
- A large metropolitan housing agency. The Philadelphia Housing Authority filed a lawsuit in December claiming the
federal housing secretary ordered the city to give a $2 million
property to a politically connected developer.
- And even cities are getting in on the action. Baltimore filed suit in January in
U.S. District Court alleging Wells Fargo Bank practiced predatory lending practices in black neighborhoods of the city, The Baltimore Sun reported Tuesday.
Are the majority of the housing-related lawsuits a sign that the questionable mortgage industry practices of recent years are finally coming to light–and therefore, to court?
Or are people just getting so frustrated with the market that they are turning to the last American hope: litigation? What do you think?