The collapse of the sub-prime residential real estate mortgage market has had significant economic impact and is likely to spawn a litigation tsunami. Some of the most severe impacts have arisen from demands that sellers of sub-prime loans repurchase them after they have lost their value.
While many contracts give purchasers an apparent right to demand loans be repurchased under certain conditions, there is a significant question as to whether a purchaser who released guidelines to the point of elimination any verification of a borrower's financial condition can nevertheless insist on repurchase when the borrowers' representations of their financial conditions turn out to be untrue.
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