Wednesday, February 16, 2011

Legal Aid to provide FREE representation in foreclosures

For the 3rd time this past week the real estate world has been hit with a whopping change for the better. To learn more about the announcement made during Chief Judge Lippman's State of the Judiciary 2011, you can either read a New York Times article by clicking here or the text of the speech by clicking here.

Coupled with the other changes, this change signals that we are in a homeowner / mortgagor / borrower friendly world where the government is going to influence lenders to agree to mortgage workouts.

In the speech, the Chief Judge took time to call out robosigners and the affect at curtailing robosigners that the new attorney affirmation requirement has had, topics that I will be discussing at a CLE sponsored by First American Title Insurance Company of New York on March 30, 2011. To be invited to this free seminar, please contact First American at 516-832-3263.

The striking part of the speech was when the Chief Judge said that "63% of homeowners appearing for mandatory court settlement conferences are unrepresented". The Chief Judge than promulgated a new program providing homeowners who cannot afford a lawyer with legal assistance at the foreclosure settlement conference stage of a foreclosure. Yet, the program's great ambitions were limited when the Chief Judge said "these legal services attorneys will provide legal assistance or representation to unrepresented homeowners at the initial conference in as many cases as possible. Thereafter, the attorney will either keep the case and continue with representation or refer the homeowner to a network of legal services, pro bono or law school clinic counsel who will be standing by to provide additional legal assistance in support of this project."

Of note, the project will be piloted in Queens and Orange Counties and is expected to be expanded thereafter.

My take is that this is an excellent move by the Judiciary. Nonetheless, this program has issues that must be addressed in order for it to be succesful including the following:
  1. There is no constitutional right to representation here as there is in the criminal arena and therefore when this program fails homeowners cannot cite the lack of representation to keep their homes while they (lay individuals) will interpret this program as establishing a fundamental right. Therefore, the legislature must follow with creating a right to give this program real teeth or clearly articulate in public service announcements how it does not.
  2. Introducing homeowners to attorneys at the conference stage means that the homeowners likely already defaulted in the matter because the time to Answer the Summons and Complaint will have expired by this stage. Therefore, the homeowner is left to negotiate a workout while the tides are against them and will also have difficulty defending the action on the merits.
  3. Private attorneys with large hourly fees and budgets have a hard time making it financially viable to perform a forensic analysis of all of the mortgage documents to red flag violations of statute and case law in order to change the bargaining positions of the parties in negotiating a workout (modification, short sale, or deed in lieu), I cannot fathom how the State can afford to provide what theoretically is included in proper legal services, particularly in the face of the major budget cuts being made every day by the Governor.
I am very interested to learn of other peoples thoughts on this topic, so please share either on this blog or offline.