WASHINGTON - A California appellate court last week overturned a lower court and ruled that mortgage loans financed by tax-exempt bonds need not be forgiven if they are sold by the trustee before the bonds are redeemed.

Several lawyers said the unanimous decision by the First Appellate District of the California Court of Appeal last Thursday calls into question the many forgiveness riders that have been written into the notes and deeds of trust in mortgage revenue bond financings.

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