As we saw with the Enron fiasco, it would seem that we should be expecting to see a similar nightmare in the mortgage lending arena. The difference here is that people are not losing their 401ks as with Enron … instead, they are losing their homes. With several of the big name lenders; Ownit Mortgage Solutions Inc., Mortgage Lenders Network USA Inc., ResMae Mortgage Corp., and just last week New Century … are among companies that have recently filed for bankruptcy. It seems as though the US Government is currently not willing to accept that this situation is a problem.
Subprime mortgages are made for individuals with low credit records or heavy debts. These loans typically charge 2 to 3 percent points more than those to individuals with higher credit scores, and these loans usually come with adjustable interest rates that can cause the mortgage payments to drastically increase in future years.
New Century for example, rode the US housing boom to become the largest independent mortgage lender to subprime borrowers. With the downward spiral in the housing market, collapsed as interest rates rose and home prices fell. New Century's market value soared to more than $ 3.5 billion in December 2004, and last year it made about $ 60 billion in loans. Similar to other subprime mortgage lender firms trying to compete for these loans, the company lowered its lending standards to keep business flowing after demand for new home loans fell. So individuals who could not afford 'normal' loans based on good credit scores were offered very attractive loans which would 'adjust' to a higher loan payment in later years. Now that these loans are adjusting, many individuals are unable to make the new higher payments.
Over the past several years, securities firms and banks advanced mortgage lenders to create a steady flow of mortgages that could package into bonds. With delinquent home loans rising nationwide, those same firms have cut back credit to mortgage lenders. Forcing the mortgage lenders to halt new loans since they are unable to make a payment to the securities firms and bank or could not persuade them to keep the credit lines open.
Various types of data may be considered as critical evidence in litigation. As more loans are defaulted and as more lenders file for bankruptcy, these types of data become very valuable for litigation:
- plain text and documents
- calendar files
- digital faxes
- audio files
- computer applications
The collection of data is just the first phase in E-Discovery. Once a data audit has been completed and a computer forensics or data recovery service is implemented, then there are the tasks to process the electronic evidence and produce the electronic evidence in a format which the client and lawyers will accept, such as TIFFs or PDFs. It is critical to get a Computer Forensic expert involved early in the process to prevent compromising or destroying the data that could be important to litigation.