The Supreme Court placed new limits Wednesday on the potential legal exposure faced by law firms that handle foreclosures on behalf of banks.

The 9-0 ruling is likely to reduce the costs that mortgage servicers incur when foreclosing on borrowers who live in states that do not require judicial proceedings to take possession of ahome. It also figures to make it somewhat harder for distressed homeowners in those same states to stave off foreclosure.

Still, the mortgage industry's win was not as sweeping as it might have been, since the justices made clear that they are not giving blanket immunity from federal debt-collection rules to law firms that represent banks in foreclosures.

Christopher Willis, a partner at Ballard Spahr who frequently represents financial institutions, said that banks face a trade-off in the wake of the court's decision. "If they assign more responsibilities to the law firms they hire, they may be able to recover more money from delinquent homeowners, but they also face the prospect of higher legal costs," said Willis. "If they limit the duties they give to law firms to steps that are required by the states as part of the foreclosure process, the reverse figures to be true."

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