Subprime and the Credit Crisis

New York, New York
26 February 2008
Hosted By: IQPC

NERA served as Title Sponsor, Program Advisor, and Chair of IQPC's subprime conference in New York City on 26-27 February 2008. The conference provided an in-depth look at current subprime litigation, regulatory updates, economic spillover, and compliance and liability issues. Several members of NERA's Securities and Finance Practice participated, with Senior Vice President Dr. Robert Mackay serving as Conference Chair. On the first day, NERA Chairman Dr. Andrew Carron delivered the keynote address, and Senior Vice President Dr. Faten Sabry delivered a presentation on the current state of the subprime market. Dr. Sabry discussed recent trends in volume, products, pricing, ratings, defaults, foreclosures, losses, and home affordability; where the crisis is heading; how to calculate the damage and how much of the crisis is yet to come; and how to install precautionary measures to limit exposure and prepare for potential litigation.

On the second day of the conference, Special Consultant Dr. James Jordan discussed the future of the collateralized debt obligation (CDO). His presentation explored recent happenings in the credit market; analyzed implications for CDO and other ABS market participants as related to the subprime crisis; determined the usefulness of ratings of CDOs; detail the lack of accurate pricing in the CDO market; and examined how to understand the liquidity and exposure hedge funds and other investors incur when dealing in CDOs securitized by poorly underwritten mortgage packages.

Also on the second day, Senior Vice President Dr. Chudozie Okongwu presented on how the subprime crisis relates to hedge funds. Dr. Okongwu discussed whether subprime woes have contributed to the need for stricter hedge fund regulation; the extent to which the current problems are restricted to subprime and are particularly relevant to hedge funds; how the increasing complexity of securities, including subprime-related securities, may lead to disputes; and the role of hedge funds in the subprime crisis and what their posture is likely to be in current and pending litigation.

Dr. Carron, Senior Vice President Dr. David Tabak, and Vice President Dr. Stephanie Plancich closed the conference with a workshop on economic issues in subprime litigation. The workshop addressed several important subprime cases and the key economic issues influencing their outcomes. Cases discussed included shareholder class actions such as In re Imperial Credit Industries Inc. Securities Litigation; predatory lending cases such as First Alliance; and Commercial Financial Services and Heilig-Meyers, which will go beyond mortgages to address the broader issues at stake in subprime consumer lending litigation.

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