Late last week, Massachusetts’ highest state court upheld a lower court ruling invalidating two foreclosures due to improper paperwork by banks. This case is certain to set off a massive wave of litigation by homeowners and lawyers eager to challenge a pending foreclosure.
Before “foreclosure-gate” opens the floodgates for both litigation and greater market uncertainty, policymakers need to step in with a common sense solution. As egregious as the paperwork failures were in the Massachusetts case, it would be far more damaging to the American economy if every foreclosure and every securitization were suddenly open to question.
This new Third Way memo outlines a set of solutions aimed at ending the potential crisis touched off by the Massachusetts ruling.
