Yes, There is a Lawyer Shortage.

Posted By Cliff Tuttle | October 9, 2009

Posted by Cliff Tuttle (c) 2009

SUMMARY: Mortgage foreclosure defense by competent lawyers is a critical need, but public funding of defense lawyers is probably not the answer.

The New York Times points out in an editorial that persons facing home foreclosure are usually unrepresented by counsel during this critical legal event. This is due, of course, to lack of money. The Times speaks of the social cost of turning people out of their homes and the personal hardship it brings. While true, there are usually sound economic reasons for a homeowner to defend a foreclosure. If there is substantial home equity, and many foreclosures follow years of regular payment, it represents a catastrophic financial loss that may be correctable.

The popular myth that the recent wave of foreclosures occurred primarily because greedy people bought homes they could not afford after adjustable rate mortgages brought inevitable high payments is simply not true. Every case is different and the stories in many cases will shock you. This crisis is largely the result of the rise of national lenders funded by real estate investment trusts (REITs). Community lenders, who did most home lending in the past, kept the foreclosure rate much lower, even during economic downturns. They did it by working out many cases before or in the early stages of foreclosure. Compared to the large national servicing companies of today, they did it quickly and cost-effectively. And most significantly, they had a personal relationship with their borrowers (who were usually depositors) and truly did not wish to see them fail.

REITs are not lenders, they are investors. They have all the power, but no relationship with the borrower. When a mortgage account reached the delinquency level, their protocols called for it to be shut down and liquidated. Period. Mortgage modifications, such as there have been, have come to this brave new world slowly, expensively and very ineffectively. Government programs encouraging such modifications, despite ballyhoo, have had very limited success. The only thing that is going to permanently change this sorry situation is for defendants in mortgage foreclosures stop being lambs and start being lions. This change, if and when happens, will be accomplished by individual lawyers who will work hard and long despite the fact that they are not being paid very well by their clients.

The Times recommends public funding of defense efforts or perhaps authorizing legal service lawyers to file class actions. But frankly, neither approach is likely to provide a real solution. Public funding has its limitations and usually falls short of what is needed to successfully complete the task. Individual lawyers who pursue cases with ingenuity and tenacity must provide the solution.

When it begins to be evident to the public, and it will, that mortgage foreclosures can be successfully defended under the right conditions, people facing foreclosure will seek out lawyers earlier and more often. There is some evidence that this is beginning to occur already. It is necessary for this change to occur for the good of the public and the profession.

Welcome

CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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