Morgan Stanley, Lone Star Stick Taxpayers With Costs of Home Foreclosure

[Purveyor]

March 7 (Bloomberg) -- Boston taxpayers spent $10,120 last year maintaining a derelict condominium building on Hendry Street. One of the three apartments belongs to Morgan Stanley and another to Dallas-based leveraged buyout firm Lone Star Funds.

The first-floor condominium was repossessed in July by Lone Star's Accredited Home Lenders Holding Co. The top-floor unit was seized in June by FV-I Inc., a subsidiary of New York-based Morgan Stanley, the second-biggest U.S. securities firm.

The public's bill for maintaining foreclosed properties abandoned by lenders and investors may reach as much as $50 billion this year, according to Peter Sepp, vice president of the National Taxpayers Union in Alexandria, Virginia. The U.S. Congress is considering various bills to help cover some of the costs to towns and cities for securing and policing the empty homes, Sepp said.

``Housing is now infecting all corners of the economy, including our local governments,'' said Mark Zandi, chief economist of West Chester, Pennsylvania-based Moody's Economy.com, an economic forecasting agency and unit of Moody's Corp.

Banks or mortgage companies typically hire people to care for repossessed properties. As foreclosures increase and the value of property drops, more companies are simply walking away, Zandi said.

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