US foreclosure ruling to reverberate

US foreclosure ruling to reverberate – The Massachusetts high court has ruled that Wells Fargo and US Bancorp wrongly foreclosed on two homeowners in a case that could have wide implications for the way homes are repossessed. The Massachusetts Supreme Judicial Court upheld a lower court ruling that Wells Fargo and US Bancorp did not have the right to claim the homes because they could not prove they owned the mortgages at the time of foreclosure. Legal experts said the ruling was likely to serve as a barometer for thousands of cases across the US, where homeowners have challenged foreclosures over sloppy or missing paperwork. The attorneys-general of all 50 states are investigating foreclosure practices amid allegations that bank employees rubber-stamped paperwork and in other ways subverted the foreclosure process. “This screams out for some sort of national correction to impose standards that ensure lenders keep track of who owns these loans,” Wells Fargo said the Massachusetts ruling did not prevent foreclosures on securitised loans, but rather set a standard legal process that mortgage servicers must follow in that state.

 Top Court in Massachusetts Voids Foreclosures by 2 Banks – The highest court in Massachusetts ruled Friday that U.S. Bancorp and Wells Fargo erred when they seized two troubled borrowers’ properties in 2007, putting the nation’s banks on notice that foreclosures cannot be based on improper or incomplete paperwork.  Concluding that neither institution had proved it had the right to evict the borrowers, the Supreme Judicial Court voided the foreclosures, returning ownership of the properties to the borrowers and opening the door to other foreclosure do-overs in the state.  Legal experts said that while this ruling did not set a precedent for other states, the outcome will be closely watched across the country because it is the first such ruling from a state’s highest court. Investors viewed the ruling as negative for banks; an index of financial company shares fell almost 1 percent on the day.  “The broad implication is you’ve got to dot your i’s and cross your t’s,” said Kathleen G. Cully, an expert in bankruptcy and lender regulatory law in New York. “You need a proper chain of title, and in both of these cases there was a gap in the chain.”

Connecticut, Vermont Move Forward on Their Own Health Care Options – With talk of repealing health care in the air, I thought it would be a good time to look at a couple New England states going in the opposite direction: Vermont and Connecticut. Both of them are in the midst of designing or recommending alternatives to the private health care market, which could go all the way up to a single payer program. First, in Connecticut, as Jon Walker described this week, the Board of Directors of SustiNet has put together for the state legislature a concept for a Basic Health program that would cover Connecticut low-income residents who make up to 200% of the Federal Poverty Level (FPL). Maria Cantwell put into the Affordable Care Act the option for states to create a Basic Health plan, which operates in a similar way to a public option, providing a higher-level product than the subsidized insurance exchanges, at a lower cost to the individual and the government. The Connecticut Post has a story today about this plan:

PM told risk of new GFC significant  Prime Minister Julia Gillard has been warned by her top officials that the international economy is fragile and the risk of another global financial crisis is significant.  But the recovery in the domestic economy appears to be ”well under way”, the Department of Prime Minister and Cabinet says in its red book, the incoming government brief prepared by its officials. ”The outlook for the international economy is fragile and the risk of another financial crisis emerging remains significant,” it says.

The Pew’s Tax Expenditure Database on Housing Subsidies – If one had to name a Holy Trinity of U.S. social programs in the late twentieth century, it would consist of Social Security, Medicare, and the home mortgage interest deduction.  All three programs are budgetary entitlements, protected from the annual appropriations process… And since 1999, the total amount of housing subsidized through tax expenditures has gone up quite a bit. It’s a bit mind-boggling when you actually realize how much money goes through this mechanism. The new Subsidyscope Tax Expenditure Database by Pew is worth your time, particularly their dissection of the subsidies we give towards housing. They created a database estimates by the Department of Treasury and the Joint Committee on Taxation. Since they differ, for the following graphs I take the average of the two different sources by year adjusting for inflation (note to Pew, have data in real and nominal dollars if possible). Here’s Ezra Klein with more.


Decades for home prices to recover – — Move over, Cleveland. Make room, Detroit. Beat it, Buffalo. There are some competitors for the title of America’s most depressed real estate market.  These are not old Rust Belt post-industrial cities, where the manufacturing economy vanished years ago; these cities were flourishing as recently as 2005. But they got crushed by the housing bubble, and most won’t recover from the damage until at least 2030. "The bubble caused a lot of over-investment in these markets," "It’s all collapsing because of the recession and over-valuation." So, bring on the contenders. Chen estimates that Las Vegas home prices won’t return to their pre-recession peak until after 2032; in Phoenix, the rebound will take until 2034; and Salinas, Calif., and Naples, Fla., won’t come back until sometime around 2038.  And these are nominal prices: Inflation-adjusted recovery will take even longer.

New American Ghost Towns – We can argue about the national reach of individual rulings in foreclosure fraud, or whether the banks will eventually be brought low. But the foreclosure crisis is a personal issue. It’s tied up in millions of individual decisions and actions, most of them forced upon the homeowner. Whatever the circumstance, we’ve seen this mass migration from the top of the housing bubble, where millions of families have had to uproot themselves and find alternative shelter. That has a startling effect on communities as a whole, particularly ones created or bolstered by the housing bubble. The amount of infrastructure poured into these communities will go almost entirely to waste now. The Los Angeles Times writes poignantly today about the new American ghost towns popping up across the country.

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