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"Let's Not Start Lionizing The Anti-Foreclosure Deadbeats"

John Carney:

None of this excuses the actions of banks that falsified affidavits, did not properly transfer mortgage notes and lien documents, forged documents, and sold shoddily securitized mortgages to investors. But the wronged party in these situations is not the defaulting borrower--it's the investors in the banks, the courts, the buyers of the securities, and the broader American public.

It's actually a bit sickening to hear defaulted borrowers describing the misdeeds of banks as "mortgage fraud." What some banks have done might well be fraud--but the fact of that fraud doesn't erase the other fact that the borrower agreed to make payments or face the penalty of losing her home.

"These companies that are too big to fail apparently also think they're also too big to comply with the law of the land and it's beyond outrageous," D'Amelio's lawyer tells CNNMoney.

Maybe I've missed something here. Can someone please explain why banks being 'too big to fail' should mean that D'Amelio should get to live in a house she hasn't paid for?

Relatedly: Arnold Kling in the Washington Times calls for reform of our title system ("The real winners will be lawyers, whose eyes shine with the dollar signs of class-action lawsuits. In fact, as you read stories about the foreclosure scandal, you should realize that it is in the interest of lawyers to feed reporters the most lurid tales of improper behavior, the better to whip up public support for a settlement in the hundreds of millions of dollars, much of which will go to the litigators."), and a suit by purchasers of Countrywide mortgage-backed securities fails.

Update: and Walter Olson.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.