Case could be first of many as finger-pointing escalates; any player in the crisis may be sued
CARLSBAD (CALIFORNIA) – MS MARTY Ummel feels she paid too much for her house. So do millions of other Americans who bought their homes at the peak of the housing boom.
What makes Ms Ummel different is that she is suing her agent. In the midst of the United States housing and global credit crisis, the players are all pointing fingers at each other.
Home owners are suing mortgage lenders. Mortgage lenders are suing Wall Street banks. Wall Street banks are suing loan specialists. And investors are suing everyone.
Ms Ummel claims that the agent hid the information that similar homes in the neighbourhood were selling for less because he feared she would back out and he would lose his US$30,000 (S$43,000) commission.
Real estate lawyers and brokers say the case, which went to trial on Monday, is likely to be the first of many in which regretful or resentful buyers seek redress from their housing agents.
‘When your house appreciates US$100,000 in the first six months, you’re not quite as concerned that maybe the valuation was US$25,000 or US$50,000 off,’ said Mr Clifford Horner of the law firm Horner & Singer. ‘But when the value of your house goes down, you ask: ‘Who might have led me astray here?’ ‘
The agent in Ms Ummel’s case is Mr Mike Little who said the suit was motivated mainly by the declining market. ‘When people see their home values and assets declining, they always feel there’s someone to blame,’ he said.
Looking at the bigger picture, analysts said today’s legal and regulatory wrangles could dwarf the ones that followed the technology- stock bust. Worse still, the size and complexity of the modern mortgage market will make untangling the latest mess even trickier. Some cases stretch across continents. Others are likely to involve state and federal regulators.
Two questions lie at the heart of many of the cases. The first is whether lenders and investment banks alerted borrowers and investors to the risks posed by sub-prime loans or securities backed by them. The second is how much they were legally obliged to disclose.
Source: ASSOCIATED PRESS, NEW YORK TIMES (The Straits Times 23 Jan 08)