The recent turmoil arising out of the subprime mortgage industry has generated a new set of legal challenges for financial institutions and other mortgage industry participants.  Our extensive experience in representing financial institutions in their most complex litigation and regulatory matters combined with our interdisciplinary capabilities bearing on all aspects of the subprime industry uniquely positions our Subprime Working Group to provide exceptional representation to companies and individuals facing litigation or regulatory investigations involving subprime matters.

Over the last five years, Gibson Dunn has represented more than 750 financial services, mortgage lending and credit card companies, based on clients identified by Dun & Bradstreet for this sector.  Our work has included major litigation, regulatory and transactional matters.  The depth of our experience is highlighted by The American Lawyer's June 2008 ranking of Gibson Dunn as one of the top U.S. law firms by the number of subprime lawsuits defended, based on data from Stanford University's Securities Class Action Clearinghouse.

Representative Litigation And Regulatory Matters

In connection with recent market turmoil in subprime lending, we are representing investment banks, underwriters, mortgage originators, directors and others in a broad range of litigation and regulatory investigation matters.  We are at the front lines of the current conflict, and, in the attached White Paper, provide an overview of potential exposures facing companies and individuals involved in subprime-related businesses.     

Examples of our experience in subprime-related litigation and regulatory matters include the representation of:

• Citigroup, Merrill Lynch, Goldman Sachs, UBS, Lehman Brothers, J.P. Morgan, Credit Suisse, Banc of America Securities, Bear Stearns, Deutsche Bank, RBC, and other underwriters in securities class actions arising out of subprime mortgage issues affecting Countrywide Financial Corp., one of the nation's leading subprime lenders. 
• The present and former independent directors of New Century Financial Corporation in class action securities litigations and related matters and proceedings arising from the company's announcement that it would restate certain financial statements and its subsequent filing for bankruptcy protection.
• The independent directors of Bear Stearns in a derivative action relating to the closing of two company-managed hedge funds which had portfolios containing subprime mortgage related assets.
• A major subprime mortgage originator and wholesaler in a SEC enforcement investigation involving subprime mortgage underwriting and securitization issues.
• A major investment bank in connection with a SEC enforcement investigation into loan loss reserves for a major subprime lender.
• The board of the country's largest mortgage insurer in connection with capital raising, fiduciary duty and compensation issues arising out of subprime and related exposures. 
• The board of the country's largest bond insurer in connection with disclosure, fiduciary duty and compensation issues arising out of subprime and related exposures. 
• One of the country's largest mortgage-financing providers in connection with an investigation by the New York Attorney General. 
• A major subprime mortgage wholesaler in connection with an investigation by the New York Attorney General.
• Bondholders of Franklin Savings Association and CenTrust Bank in connection with extensive litigation against the RTC/FDIC.
• Subprime lender Cityscape Financial Corporation in connection with numerous securities class actions.
• Auditors in securities litigation arising out of the bankruptcy of subprime lender Southern Pacific Funding Corporation. 
• First National Bank of Marin in class action and OCC matters arising from alleged inadequate disclosures in connection with high interest credit cards issued to subprime cardholders.  A complex class settlement was negotiated to coincide with announcement of OCC settlement and thwart filing of copycat class actions.
• Bankfirst, a South Dakota credit card lender,  in connection with a Federal Reserve enforcement matter concerning its subprime lending practices. 
• A privately held bank in conducting an internal investigation of "whistleblower" allegations that the bank's mortgage lending subsidiary, whose business focused on making loans to lower credit quality customers, utilized inflated borrower credit scores in originating and selling mortgage loans.  The report of this investigation was furnished to the bank's independent auditors and to bank regulatory officials.
• ITT Corporation and its mortgage affiliates in connection with consumer class actions involving failures to make timely reconveyances and challenging other lending practices.  
• Auditors in connection with the bankruptcy of PinnFund USA, a Ponzi scheme which deceived the public into thinking it was engaged in making subprime loans. 
• Financial services company and insurance affiliates in successful litigation and settlement of quasi-class claims challenging administrative fees charged to customers on loans to subprime borrowers.   
• Downey Savings in a California class action in Orange County Superior Court challenging failure to comply with California's statutory requirements for recording of reconveyances and alleging improper collection of reconveyance fees; obtained summary judgment.
• ITT property and life insurance and finance affiliates in litigation with Consumers Union over administrative charges assessed in connection with processing of consumer small loans. 
• Affiliated ITT entities in successful defense of UCL claims seeking restitution exceeding $500 million for alleged violations of Bankruptcy Code requirements regarding debtor re-affirmations arising from consumer small loans to subprime borrowers. 
• Downey Savings in class action challenging the method used to calculate interest rate changes on adjustable rate mortgages. 
• ITT CFC and its affiliates in quasi-class action under the Business & Professions Code Sections 17200 and 12500 alleging misrepresentations and numerous other unfair practices in connection with consumer small loans to subprime borrowers. 
• ITT affiliate property and life insurers and consumer financial lender in class action in San Francisco Superior Court filed on behalf of more than 400,000 customers alleging false advertising, unfair business practices, violations of the Consumer Legal Remedies Act, and other claims arising from ITT Consumer Financial Corporation's practices in the making and collection of consumer small loans to subprime borrowers throughout the state. 

Bank Regulatory Counseling And Mortgage Industry Experience

Gibson Dunn has an extensive and sophisticated banking regulatory practice with respect to transactions, enforcement and compliance, and regulatory and policy matters.  Our corporate representations of mortgage and subprime lenders have included transactions, corporate and securities, and corporate governance advice.  We have represented underwriters and issuers in offerings of subprime and other mortgage issuers including Saxon Capital, Inc. and Peoples Choice Financial Corporation.  One of Gibson Dunn's attorneys is designated underwriters' counsel for American Home Mortgage Investment Corp. and RAIT Financial Trust and currently is engaged in extensive representation of participants in the subprime industry. 

Recent representative matters have included:

• Advanta Corporation in connection with examination and supervision issues related to subprime securitization.
• Bankfirst in connection with a Federal Reserve enforcement matter concerning its subprime credit card program and transactional matters.
• Federal Home Loan Bank of Chicago in connection with its Mortgage Partnership Finance program and with corporate governance and securities issues associated with the Home Loan Bank's SEC registration requirements.
• A consortium of trade associations and banks, including the American Bankers Association and the Financial Services Roundtable, before the Supreme Court in the case of Watters v. Wachovia, concerning Comptroller of the Currency preemption, which is a fundamental legal basis of the nationwide lending regime used by many mortgage, subprime and credit card lenders.
• Friedman Billings Ramsey in connection with the underwriting and proposed underwriting of securities by major subprime lenders such as WMC Finance Company.
• Washington Mutual with respect to a variety of complex housing finance structures, as well as legislative and policy matters such as the international process of developing new risk-based capital rules (the "Basel II" process).
• Sovereign Bankcorp in connection with a range of matters, including Relational Investors' efforts to affect Sovereign's business strategy, including its sale of shares to Banco Santander, lending programs, regulatory applications, and community reinvestment.
• The Financial Services Roundtable (the trade association for 100 of the largest financial institutions) in connection with a petition to the FDIC requesting that the agency promulgate a rule which would provide state banks operating interstate with parity with national banks with regard to preemption of state law.
• Saxon Capital in its $800 million sale to Morgan Stanley.
• Ameriquest Capital in the sale to Citigroup of an option to purchase most of its business.
• The CEO of subprime lender Encore Credit.
• Long Beach Acceptance, a subprime auto lender, in its sale to Americredit for $300 million.
• ResMAE Mortgage Corporation in its sale out of bankruptcy.
• KMV in its acquisition by Moody's.
• One of the world's leading retailers in connection with its efforts to obtain a bank charter.
• Caisse Centrale Desjardins, a Canadian financial institution, in connection with U.S. regulatory issues.
• Diversified Credit Investments in connection with creating a fund which provided diversified credit portfolios to institutional investors.
• Bear, Stearns & Company as underwriter in a $150 million takedown of Aames Financial Corporation high yield senior notes.
• NatWest Securities as underwriter of $107 million public offering of common stock issued by Aames Financial Corporation.