Cyclical Market Affects Legal Perspective as Well.

Warwick, RI -- Simply put, the current crisis is another showcase of "the market working," Charles A. Lovell, the chair of Partridge Snow & Hahn LLP's creditors' rights practice group, told MSN.

As the market readjusts going forward, he hopes what the current crisis will bring about is a higher awareness of its cyclical nature, problems deriving from market history lessons not learned and doomed to be repeated.

"You have lenders who make bad decisions and then get punished, and then 10 years later we got new lenders making bad decisions, even though the same people are not necessarily in the business. If you can keep institutional knowledge in the lending industry so people do good underwriting all the time, then I think it evens it out," he said.

"Legislators need to understand history, too, and not overreact to problems. Some regulation is necessary, but to overregulate is to kill an industry."

However, he recognized the fact that "there is so much public pressure" that legislators will continue to intervene. One example of the adverse effect of a government intervention he said is going to be increased cost. For instance, in Massachusetts new foreclosure requirements are almost doubling fees, including increases in legal advertisement costs which may go up to almost $3,000.

At the same time, the mortgage market is currently facing an unprecedented volume of foreclosures and defaults, which slows down its ability to respond fast.

"The sheer volume increase poses a lot of challenges for lenders and their counsel. It reflects a lot of the bad lending decisions and the bad borrowing decisions of the last few years," he said. "There's plenty of blame to go around for the mortgage crisis, but it is not on one side of the fence. Clearly there were mortgage brokers and originators who oversold people their ability to either own a home or get a large loan. At the same time many borrowers were complicit in this" by going to a closing with inaccurate income or other data, which led to borrowing decisions that were based on unrealistic expectations thinking real estate market values will increase for ever.