Thursday, October 15, 2009

A victory for common sense and straight dealing

A Massachusetts Land Court judge has reaffirmed his decision last spring that lenders could not sell foreclosed properties where they couldn't show who owns the mortgage.

The case has sent shivers through the Bay State's real estate and banking communities, and has had ripples nationwide. (Some federal bankruptcy judges have made similar, and even more favorable, decisions that kept homeowners from losing their properties to foreclosure.)

The problem arises out of the razzle-dazzle of the housing bubble, where mortgages were sliced and diced, packaged, sold and re-sold. In the process, such old-fashioned concepts as ownership (not to mention honest dealing) were conveniently ignored. Now that the chickens have come home to roost, the people who thought to profit from the financial manipulations that led to the bubble are weeping, wailing and gnashing their teeth.

Interestingly, the story linked to above focuses on the difficulties the judge's ruling poses to re-selling, rehabilitating and recycling properties already foreclosed on for new use. That may well be the immediate effect, but upstream the decision will reduce the number of foreclosures and, likely, to increase lenders' willingness to restructure loans.

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