A group of mortgage bondholders are seeking to get the defunct H&R Block's subprime lending unit Option One Mortgage to buyback billions in failed mortgages, according to a Reuters report today.
The investor, the report said, might have been motivated by the recent Bank of America $1.6 billion settlement with Assured Guaranty, which insured the bank's mortgage bonds.
However, H&R is not an isolated case. The mortgage market is going to see more lawsuits and settlements having to do with failed RMBS, according to experts.
"While there is talk of settlements being reached between the many arranger banks of structured products and the regulators, these talks will only spur more private litigations, not deter them," said New Oak Capital President James Frischling and general counsel Rachel Gould in commentary today. "As a result, things will get even more litigious as buyers seek recovery for their losses and sellers prepare to vigorously defend their processes."
According to New Oak, among the hottest claims financial institutions are faced or armed with are issues related to underwriting, sourcing of the collateral, the disclosure of internal and external pricing, warehousing practices, compliance with disclosed underwriting guidelines, portfolio diversity, and risk analysis.
