Litigation over the foreclosure process reached its highest level in the second quarter than in any quarter since MortgageDaily.com’s Mortgage Litigation Index was introduced in 2007.
The Second Quarter 2011 Mortgage Litigation Index came in at 190 total cases. Activity grew 26 percent from the prior quarter and was well more than double the level a year earlier.
The report, which reflects mortgage-related legal actions covered by MortgageDaily.com between April 1 and June 30, was prepared in conjunction with Patton Boggs LLP.
There were more cases related to foreclosures than any other category. Foreclosure litigation, which involves rulings in favor of borrowers or cases against rescue firms, was up two-thirds from the first quarter.
Litigation involving mortgage servicers, which often goes hand-in-hand with foreclosure activity, was a third higher.
“Foreclosure litigation is on the rise as borrowers are increasingly challenging foreclosures because mortgagees continue to struggle proving mortgage ownership,” says Dallas Partner Pat McManemin. “Repurchase and secondary market litigation is also increasing as institutions fight over responsibility for the substantial losses suffered by the holders of these loans.”
Foreclosure timelines have soared over the past year, with the average loan in foreclosure having been delinquent for a record 587 days as of June, according to Lender Processing Servicers. Slower processing has increased inventories of foreclosures, both listings and “shadow” inventories, in markets across the nation. Concern over litigation is often cited as a contributing factor increasing the time it takes to process a foreclosure.