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The destruction of home values caused by the Great Recession remains a drag on Rhode Island’s economy. And unfortunately, the actions of U.S. District Court Judge John J. McConnell have kept the state from recovering.
Judge McConnell put a halt to the foreclosure process in federal courts, ordering lenders and homeowners to enter into mediation, with the expectation that lenders would modify loans – read reduce principle – allowing people to remain in their homes.
This approach would seem to be a humane solution to the significant human suffering caused by the bursting of the housing bubble and the near collapse of the financial system. But in the long run, this approach is wrong-headed and prolongs the sickness of the real estate market. Oh, and it also short-circuits the correct and deliberate functioning of the law.
The 1st Circuit Court of Appeals took that stance in its June ruling that told Judge McConnell to go back to the drawing board. While considering just what to do, he has asked that those in the process – more than 800 cases by last count – continue with the mediation. As far as an impartial observer can see, this approach is not getting any closer to solving the problem, but it is enriching attorneys on both sides of the aisle.
It is time that this approach ends. Rhode Island’s real estate market appears to be improving, but it still has a long way to go. The Ocean State has one of the largest gaps in the nation between its median home price now and at the peak in 2006. One can lay much of that difference on Judge McConnell’s stay. And with the market being artificially supported by the order, there are many people who cannot find a new, more affordable home. •