Credit Suisse gets tough with subprime lenders

2 April 2007

A unit of Credit Suisse is suing three subprime mortgage lenders for $31 million over reneging on the terms of loan deals.

DLJ Mortgage Capital (DLJ) is suing Infininty Home Mortgage and Sunset Direct Lending for $24 million and $3 million respectively over their failure to comply with a contractual obligation to repurchase loans they had originated when borrowers defaulted on payments.

It is alleged that under the terms of the contract, the lenders were obliged to buy back loans that were delinquent for 30 days or more.
Meanwhile, DJL, which specializes in purchasing mortgage loans from lenders, is also suing Netbank for $4 million over an alleged breach of contract through not providing information and monies to the unit.

News of the lawsuits comes as meltdown in the US subprime mortgage market resulted in significantly reduced annual profits for many of the key US investment banks.

Since the beginning of 2006, over 30 subprime lenders have either suspended their operations, are seeking buyouts or have gone to the wall.
In February 2006, a division of Bear Sterns decided to sue MortgageIT when the lender did not repurchase $69.8 million in defaulated loans.

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