Friday, October 21, 2011

OK, now the Joneses get to sue over the neighbors who couldn't keep up.

Maya v. Centex is a depressing case even though in a way it's a win for victims of the housing bubble. It clears the way for a group of tract house buyers to sue large-scale developers for selling neighboring houses to cannon-fodder -- to shallow-pocketed buyers who had their hopes artificially inflated by the hard-sell, who were unlikely to manage their mortgage payments over time.

The Bloomberg writeup says the plaintiffs "won a bid to proceed with claims that the companies inflated the “housing bubble” in neighborhoods they developed, leading people to pay more than the properties were worth."

So, yeah, from that point of view, one cheer for the plaintiffs. And, yeah, another cheer because it gives developers one more practical reason not to prey on the gullible.

No third cheer, though, because these plaintiffs basically get away with saying "How dare you give us losers for neighbors?" So, OK, that's my paraphrase, but these quotes are direct from the opinion:
Plaintiffs claim that defendants represented that they were building “stable, family neighborhoods occupied by owners of the homes” According to the plaintiffs, “[i]mplicit in this marketing scheme was that [d]efendants were making a goodfaith effort to sell homes to buyers who they expected could afford to buy the houses and would be stable neighbors.” Nevertheless, defendants marketed the houses to “unqualified buyers who posed an abnormally high risk of foreclosure.”
and later on:
"Plaintiffs further contend that the foreclosures and short sales have “drastically altered” the “desirability” of their properties and neighborhoods, resulting in abandoned houses, multiple families living in one home, transient neighborhoods, and even increased crime."
So, wot, people who can't afford to pay big honking inflated mortgages aren't "stable" and don't have families? Or their families don't count as "family" in the adjectival form because they don't have enough money? Or when families have to double up in a house they aren't properly nice "family" families any more?

This is snobbery converted to legal principle. I guess I care about that more than the lesson to the developers. Maybe this is an impractical approach to take, I don't know.

The Ninth Circuit ruled on this one about a month ago. I don't have the posterior fortitude to sit through the oral argument but you can if you like.

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