Lack of Legal Help: One More Way the Deck Is Stacked Against Homeowners

As bad as America's foreclosure crisis is -- and it's very bad, with over 300,000 homes receiving a foreclosure filing every month -- it's being made even more devastating by the lack of legal assistance available to beleaguered homeowners.

According to a new study by the Brennan Center for Justice, set to be released tomorrow, "the nation's massive foreclosure crisis is also, at its heart, a legal crisis" -- with the vast majority of homeowners facing foreclosure doing so without legal counsel.

For example, in New York's Nassau County, in foreclosures involving subprime or non-traditional mortgages (which disproportionately are targeted at minorities), 92 percent of the homeowners did not have a lawyer.

Having legal help can be the difference between people keeping their homes and being evicted. A lawyer can stop foreclosure proceedings or put enough pressure on lenders to get them to rework the terms of the loan. A lawyer can also intervene in other ways, such as enforcing consumer protection laws or spotting legal violations by banks and lenders.

According to the report, the barriers keeping homeowners from obtaining proper legal representation are twofold. The first, not surprisingly, is funding.

In 1996, the budget for the Legal Services Corporation, the primary agency that provides help for low-income Americans in civil cases, had its budget cut by one-third. At this point, to match the funding level the Legal Services Corporation received in 1981 would require an increase of $753 million. If Goldman Sachs or Bank of America needed that kind of cash (or even 10 times that kind of cash), Washington wouldn't think twice. But low-income homeowners have no clout in DC. No wonder the Brennan Center found that legal service programs for the poor are currently "besieged with requests for foreclosure assistance."

The second barrier is that restrictions to adequate legal help have been deliberately built into the system. Remember the "Contract With America"? It turns out one of its provisions severely limited the ability of homeowners to get legal protection from predatory lenders. For instance, homeowners represented by the Legal Services Corporation are barred from bringing class action suits. Nor are they able to make the other side pay attorneys' fees even when the law would normally allow it. As the report states, "the possibility of having to pay attorneys' fees provides a critical incentive to help ensure that a better funded legal adversary does not drag out proceedings in an attempt to exhaust the indigent client's resources."

The Obama administration has called on Congress to remove many of these limitations, but its $789 billion stimulus plan didn't contain a single dollar for foreclosure-related legal help. That's about as "shovel ready" a program as one could ask for, but it somehow didn't make the cut.

I've written before how foreclosures are a gateway calamity, with every foreclosed home creating a whole other set of crises. The Brennan study backs this up with cold hard statistics. According to the report, an estimated 40 million homes are located next door to a foreclosed property. The value of these homes drops an average of $8,667 following a foreclosure. This translates into a total property value loss of $352 billion. And vacant properties take a heavy toll on already strapped local governments: an estimated $20,000 per foreclosure (California is estimated to have lost approximately $4 billion in tax revenue in 2008).

And the negative impact of a foreclosed home can affect the entire community: a one percent increase in foreclosures translates into a 2.3 percent rise in violent crimes.

But even though the collateral damage of the foreclosure crisis is widespread, the crisis continues to get short shrift by the media and by Washington. And as the Brennan Center study powerfully demonstrates, the legal deck is utterly stacked against struggling homeowners. It's time to do the right thing and give at-risk homeowners -- especially those who have been the victims of discriminatory lending practices -- access to at least a tiny fraction of the legal tools at the disposal of the banks forcing them into foreclosure.

To read the full report in pdf format, click on "Full Report" on the Brennan Center's website.

 

 

Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff

Comments

[PhilipTaylor]

The simple truth that I have suggested before it to find a Lawyer who will write a letter for a couple hundred dollars to your bank or agency on their stationery and describing what you want the BANK to do.

Go into the lawyers office with a list of EXACTLY what will make it so you can keep your house!

Do NOT allow the Lawyer to try to charge you more than the $200 to $300. Tell her/him that is all you can afford!

Such a letter from a lawyer will be given far more PRIORITY over other foreclosures!

[DutchUncleAl]

I used an attorney on one of the several houses I have purchased in my life time and the realestate agent and builder used a modification to the contract that I sent to them to sell the house to another party. Interesting enough the house I ultimately bought was a way better house and the home of many happy memories.

[davidbennett]

I'd like some clarification, if possible, on the legal implications of foreclosure, in the situation where the homeowner does have some equity in the property.

Example. Mr Smith owes $90,000 and defaults. Bank sells for $120,000. Who gets the $30,000 difference?

In the UK, the standard way that a lender sells over the head of a defaulting homeowner, is to sell as mortgagee in possession.

Any equity left after the lender pays itself, goes to the homeowner.

Foreclosure, on the other hand, means that the lender keeps the whole of the price when the property is sold, including whatever equity the defaulting owner had in the property ad the homeowner gets nothing.

It would be very rare in the UK for a lender to apply to the court to foreclose. And if a lender did apply to foreclose, the homeowner can apply to the court for the order to be converted to a sale by mortgagee in possession, and this will {always} be granted.

So my question is, in the U.S, if a lender sells over the head of a defaulting homeowner who has some equity in the property - who gets the excess over and above whatever amount the lender requires in order to repay itself out of the sale proceeds?

[UNCLEJOE]

300,000 Foreclosures a month, and the majority of foreclosures are due to lose of traditional jobs sent overseas, catastrophic illness of family member, sleazy variable mortgages loans orchestrated to fail after homeowners have invested 30 to 50 thousands in mortgage payments and on improving the embellishments of the home.

Before the Federal Reserve took over carte blanche the USA Monetary System in 1913, depressions were ADJUSTMENT depressions that lasted no longer than SEVEN months and were always of a local area, i.e. farming, manufacturing, or any major industry.

This financial crisis of 2008 is NOT a failure of the Federal Reserve Central Bank to Stabilize our economy; in fact, the Fed has been very successful in carrying out it's surreptitious strategy to debilitate, and gain control lock stock and home ownership of the USA.

The Fed has all but succeeded; it takes only one more major financial crisis to orchestrate 10 or 20 years down the road to insert I.D. micro chips in Americans for their own safety, with their ulterior motives to close the page of free competitive democratic Capitalism and unroll the vintage scrolls of the medieval society with the Fed Lords and the former Middle Class as the share croppers.

The American dream faded into nightmares for 300,000 former home owners every month for the past two years with no end in sight.

Who will help you when the Fed knocks down your front door?

END THE FED before it ends the USA.

[msjimmied]

One foreclosure every 13 seconds...

http://www.reuters.com/article/smallBusinessNews/idUSTRE59705J20091008?sp=true

[Areyoukiddingg]

You are so right, and the issues seem to get more and more complex, but if you're being foreclosed on and do NOTHING you WILL lose your house. You have the right to represent yourself; a good place to read about doing this is http://livinglies.wordpress.com/in-trouble-right-now-press-here/lawyers-who-get-it-work-in-progress/ No I don't work for them, it's just a site I've found helpful. Stand up and fight for your rights and don't be afraid of the judge.

[abbeysbooks]

There is legal help for foreclosures. See my diaries at dailykos dotcom under my name here. I got run out of there, harassed, ridicules and banned for posting these in 07. that's when I saw it coming. It's supposed to be a progressive site. My name and legal diaries in the search engine there.

Meanwhile buy some time by asking for your promissary note as Marcy Kaptur suggests in Moore's Capitalism movie. They have sold the note to investors getting even more cash. Now they have to buy it back. Push on this.

[Entitlement]

Headline: "The Lobbyists are Winning on Healthcare Reform."

Is this somehow connected to this blog entry?

The banking industry is running interference on any mortgage industry reforms. Didn't they get bailed out?

Wall-street is running interference on any sort of securities reform. Did they get bailed out too?

We can't get healthcare reform. Which lobbyists are going after that?

So, who ends up paying for each of these scenarios? It doesn't all fall back to the middle class does it?

What's it going to take to unseat corporate America? Obviously, having any sort of conversation about what's right has nothing to do with it. It's about power. One person one vote doesn't work in our country because my vote doesn't mean a darn thing once Congress is in session. My dollars vote. Since I don't have any, I don't have a voice. That's a democracy how? We are living a delusion and accepting it. People DON'T have the power. Corporations have the power. People DON'T count. Our dollars are just the corn out in the field to be harvested by corporate America. That's why they call us "consumers" and not people. We have been reduced to an abstraction.

[heiko]

I agree.

[yeswecanjane]

I am owed $50,000 in back childsupport and realize that after 20 yearsof fighting Brown County Child support that I will not receive a dime of it. I can't get a lawyer who will go after the criminals who help the deadbeat get away with child support neglect. BCCS can not be sued. If they gave me false hope of "yes your daughter will receive every dime owed to her and just wait another 18 years until his 6th daughter is 18 ..she will begin to receive child support again:) YEAH! I was working two jobs for those years to support my one child... But if you are thinking that this government is here to help the working class just look at how many jobs went overseas to be replace by service jobs with little or no benefits!
TOP 1% earn $12.5 million a year to the middle class $62,000. Oh well.....

[Entitlement]

You bring up an often ignored reality of our great country. If you ask someone what the average age of a homeless person is, they will say 40's, 50's or even 60's. The reality is that it is somewhere around 7 years old. And, it depends upon whose definition one is working from. For our great government, to make things look all nice and rosy, if a family of five is living in a one room flee bag motel, that's considered housed. We shift them off to a complicated terms that most people aren't willing to wrap there minds around, the concept of "near homelessness."

A study just came out a few months ago and showed that the effect of poverty on a child in our great country is the developmental equivalent of a brain stroke due to malnutrition, stress, lack of sleep, lack of health care, lack of opportunity, child abuse and other environmental factors. We battle homelessness in the adult population while we sit by and watch the next generation grow up to replace any advances that we might make.

The vast majority of these homeless families are those of single female parents often from divorce. They are used up, discarded and relegated to the human landfills of our cities, the shelter and welfare system. I admire the poster "yeswecanjane" for her resilience and her ability to still have a positive attitude.

[Entitlement]

I forgot to mention. The odds are that the adult in that single parent family is overwhelmingly in favor of women, sadly.

Luckily, I'm a guy. If I don't like my big truck. I go get a new big truck. My wife not hot enough to compete? I go get a new hot trophy wife and go for the trophy kids one more time. I love this consumer throw away world. My objective is to get my seed out there as much as I can to leave my legacy on this fine world. Go forth and prosper! Because I'm a self-made man, a man's man. You don't like me, tough. I've got my shades, my team jersey, my season tickets, my cool friends. I've arrived and you're all jealous.

Is this what defines us? And, we don't owe anything to the social service sector of our country because it provides meager assistance to the undeserving? We value what?
Where are the keys to the Kingdom again?

[nellyb stl]

The 'deck' is stacked against homeowners from the very top; and no one in Washington is doing anything about it. The financial institutions are able and willing to bring America to it's knees again -just so they can keep pocketing their millions, paying off Congress and saying in effect, "We have no loyalty to anyone or any country. Our loyalty is to our bank account."

[mamacat]

Arianna is smack on the money again.
This is just one more example of a social network program that the Right has been systematically dismantling since the days of Reagan. What we all need to remember is that they have been attacking and destroying our institutions for decades now, and we need many years of concerted efforts to undo the damage they have done.

On a related matter, there is another excellent article from Paul Krugman in the NYT today. He writes about the consequences of the Right's thirty year effort to undermine our public education system, and how the fruits of their labors have made our populace much less qualified to find jobs. I happen to think that he, like Arianna, is entirely correct, and that he is illuminating another consequence of our having allowed neo-cons to run the government.

[Antiks]

Yep, this has been a government by and for the rich for the past 30 years. I read that Krugman piece and it is spot on.

[Fred Hood]

YEA give us the next 700 billion and we can buy lawyers judges even senate votes like the banks.....

[booksnmoreforyou]

Create a rule that for every dollar in legal service the mortgage company spends it has to give the same amount to the defense.

[tmiroe]

Home foreclosures is the crux of this whole economic melt down. Main street bailed out Wall Street, now its time to reciprocate by President Obama declaring a moratorium on all foreclosures. This will stop the downward spiral of home prices, stability in the housing market which will lead to new construction and renovations to start up again. Its seems so obvious, but why hasn't the administration acted on these key areas of this economy? Along with foreclosures, JOBS is should be ranked number one for the Obama administration. So far, it seems they are relying on the good will of banks and the stimulus package. WRONG, and Doubly WRONG. Keep up the pressure Arianna, you're doing an excellent job.

[TheEmptinessOfTruthiness]

I just read the transcript of the Bill Moyers you recommended.

Seems to me if the bailout money had been channeled to mortgage payers it would have served the same purpose paramount in the minds of the various secretaries of the treasuries of Goldman Sachs et al, namely saving GS et al from themselves.

So even beyond the Wail Street government circuit, as discussed on Bill Moyers, there is actually in effect a short circuit.