Lawsuits and Insurance Implications in Sub-Prime Lending

The real estate and mortgage market has taken a hit in recent years. With increased foreclosure rates, many real estate agents, brokers and lenders are struggling to turn the market around. As part of the downward spiral in real estate, there has been an increased focus upon the dynamics of subprime lending.

Catering to high-risk borrowers, the subprime lending market has resulted in the bankruptcy of major lenders following the default of borrowers who are no longer able to manage their mortgage loans. For some subprime lenders, real estate agents, and brokers, the downward spiral of subprime lending programs has resulted in major law suits.

To protect themselves from significant losses associated with the subprime lending law suits, corporations are turning to their E & O insurance policies. Also known as "Errors and Omissions" insurance coverage, the directors and officers of these major lenders are often afforded protection from lawsuits filed by the variety of plaintiffs.

With such varied language in the D & O, E & O and credit risk insurance policies, the law suits filed by plaintiffs, in relation to subprime lending, often find the court and legal process can be quite tedious. While traditional liability and homeowner's policies carry very stringent language and guidelines, these D & O, E & O and other mortgage loan or credit policies can be as varied as the property types and financial transactions they insured.

If you are a homeowner who is involved in a legal dispute involving a subprime loan, it is important to understand that any litigation filed may take many years to resolve. As the courts become overwhelmed with cases, often listing defendants in one case as plaintiffs in another, you can expect that attorneys will take many months to process through policy language, subpoena mortgage, credit and financial records, and many more months of court filings and Motions to Continue.