The Mortgage Mess: Let’s Talk it Out

As we discussed yesterday, the Massachusetts Supreme Judicial Court ruling on foreclosures is going to have wide ranging impacts. CNBC’s John Carney has a really sharp rundown of what the problems could look like for the big banks in the wake of that ruling. The nut:

The time it takes to foreclose in Massachusetts is likely to extend beyond the current 11-month period by several more months. Many more attempts at foreclosure in the state will be contested.

Basically, if your bank is foreclosing on your home in Massachusetts, you should be contacting a lawyer and planning to contest the bank’s right to foreclose right now. Foreclosure notices will now become the first step in a lengthy litigation process in Massachusetts.

The effect of this case is unlikely to be limited to Massachusetts. Other states will apply their own laws, of course. But the Massachusetts Supreme Court is regarded as one of the the best courts in the US, which means that this decision will be taken as what lawyers call “persuasive precedent” in other states.

The time involved in the foreclosure process, as well as the skewed incentives, has been one of the bigger problems we face, drawing out an economic catastrophe over years. How are banks going to handle the still massive volume of foreclosures when, as Julia Gordon noted yesterday, the existing system has failed so miserably? Alon Cohen, writing for the Center for American Progress, has examined and proposed a stunningly simple procedure that holds great promise for helping the banks out of this mess, keeping homeowners in their homes, and helping states and cities avoid the major costs that come: get everybody in a room and let them talk it out. Here’s Alon sitting down with Reid Cramer and discussing the benefits of “opt-out mediation:”