Home foreclosure isn’t a legal abstraction for Yolanda Paschal, a recent graduate of the University of Miami School of Law. Her parents are facing foreclosure on the Miami house she grew up in. They’re luckier than others, since they have another home to fall back on, but the experience has convinced Paschal how acute the crisis is in Florida, which now has the nation’s highest mortgage foreclosure rate, at 17%. “I’m part of this community,” says Pascal, 25. “I can’t escape how deeply this is affecting not just my neighbors, but me as well.”
Paschal plans to practice business litigation next fall once she joins the firm that hired her. In the meantime, she will put her legal education to use for South Floridians like her family thanks to a $10,000 “foreclosure defense fellowship” she received from the UM law school. The innovative new grant program has sent out eight recent grads this month to help local residents navigate one of the law’s most labyrinthine arenas.
But as much as Paschal and her UM colleagues can help a little, they only represent a drop in the bucket: with foreclosures continuing to rise, the shortage of lawyers available to represent homeowners trying to save their most precious asset has reached emergency proportions.
Unlike similar legal fields such as bankruptcy, foreclosure is rarely a full-time practice and is often handled by real estate attorneys or legal aid services agencies. Still, more than 3 million property foreclosures were filed in the U.S. last year; South Florida is expected to see more than 150,000 this year compared to fewer than 25,000 three years ago. And while mortgage modifications had been on the upswing in recent months, the Boston-based National Consumer Law Center reported this week that many large banks and other mortgage servicers have decided it’s cheaper to foreclose than to offer more affordable loan terms. Making matters even worse, as many as 86% of foreclosure victims in hard-hit areas didn’t have legal counsel last year, according to the Brennan Center for Justice at the NYU School of Law, which released a report earlier this month.
If those numbers don’t draw more attorneys into foreclosure law, at least as a short-term specialty until the crisis subsides, homeowner advocates hope it will at least motivate more of them to shift more of their pro bono work in that direction. In hard hit counties like Miami-Dade, bar associations are responding by holding foreclosure defense clinics for local lawyers. Otherwise, the fear is that far more people than necessary stand to lose homes, possibly slowing economic recovery and clogging a civil court system already ravaged by states’ budget cuts.
That specter of judicial paralysis helped spur UM law professor Michael Froomkin to create the foreclosure defense program. It places fledgling attorneys like Paschal with legal aid service organizations to help tackle the backlog of cases more than 50,000 foreclosure filings so far this year in Miami-Dade County alone. Many homeowners don’t know what legal defenses are available to them as they battle lenders to keep their properties or at least make foreclosure less painful, and costly. “Potentially, one of the most significant [defenses] is that the lender, because so many home loans were securitized during the housing boom, often doesn’t even know who owns the mortgage anymore,” says Froomkin. That, he adds, could throw into question the lender’s right to bring the foreclosure case in the first place.
Carolina Lombardi, senior attorney at Legal Services of Greater Miami Inc., which is mentoring some of the UM fellows, says foreclosure defendants also need attorneys to help them fend off all too frequent lender practices such as exorbitant escrow claims. “Homeowners who have lawyers are usually prevailing in those cases,” says Lombardi. But she notes that unless homeowners fall below the federal poverty line , they can’t qualify for the free legal aid that agencies like hers provide. That creates an obstacle for most foreclosure defendants, who aren’t impoverished but, due to job loss and other circumstances that brought them to the brink of losing their home, often can’t afford a lawyer.
Another impediment is foreclosure law itself, a bureaucratically convoluted field worthy of a Dickens novel. “It’s a labor-intensive area of practice,” says Paschal. “It involves a ton of paperwork.” Yet another is the relatively low pay attorneys usually reap from defending foreclosure clients. Melanca Clark, counsel at the Brennan Center and co-author of this month’s study, urges Congress and state legislatures to create incentives, like more funding for foreclosure legal representation, that “level the playing field” against lenders and their comparatively well paid lawyers. Restrictions on government funding for legal services should be relaxed, she says, especially rules that don’t let victorious foreclosure defendants collect attorney fees, as prevailing parties in most other kinds of civil litigation do. “We need structural reforms as badly as we need more [foreclosure defense] lawyers,” says Clark.
A growing number of court jurisdictions are attempting to reduce the need for lawyers, as well as the glut of cases, by mandating mediation between lenders and homeowners. Courts that cover Miami-Dade now require such arbitration, as they do in cities like Philadelphia. But the efforts to modify mortgage terms or find other ways to avoid full-blown foreclosure don’t always work, and many cases still end up in court. State bar associations like Florida’s are also promoting pro-bono foreclosure work. The effort is helped, says Lombardi, by a new awareness among many lawyers who once deemed foreclosure victims foolish, lazy or unethical borrowers, but who now realize “this is often about decent, hardworking people who fell prey” to loans whose conditions weren’t always clear.
Still law schools like Miami’s may be one of the best untapped sources. Other programs, like the Yale Law School’s ROOF Project, also send students into local communities to aid foreclosure cases; but UM’s is one of the first to create a paid fellowship. It also makes sense, says Paschal, since so many law firms today are trimming costs by delaying the start date for new hires by a year or more. That gives law grads time to pursue this kind of work whose complexity, Paschal adds, is ideal for cutting young legal teeth. Says Froomkin, “It’s a great opportunity to give recent graduates some invaluable experience and help your neighbors through this enormous spike in foreclosures,” if not help end it sooner.