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What Bar Can Do To Alleviate Foreclosure Crisis

New York’s foreclosure crisis is far from over, but some welcome signs of hope have recently emerged.

  • Mark Ladov
Published: February 29, 2012

Published in New York Law Journal.

New York’s foreclosure crisis is far from over, but some welcome signs of hope have recently emerged. Attorney General Eric Schneiderman’s announcement that the national “robo-signing” settlement would bring $136 million in foreclosure prevention funding to help struggling homeowners was important news. And Chief Judge Jonathan Lippman proposed a much-needed overhaul of our state’s foreclosure settlement conferences in his 2012 State of the Judiciary address.

These steps are critical. However, they won’t help solve the foreclosure crisis unless we provide the legal resources needed to resolve each homeowner’s case appropriately, including adequate counsel for all parties and appropriate investments in our courts.

As anyone who walks the halls of the State Supreme Court can tell you, foreclosures are overwhelming our judiciary. Between 2007 and 2011, foreclosure cases rose by a staggering 683 percent, according to a court task force report. Cases sit in the system for an average of about two and a half years. Underlying the foreclosure crisis is a judicial crisis, and it is dragging down New York’s economy.

Judge Lippman’s proposal is an important step forward. It creates new foreclosure court parts, established in partnership with legal services organizations and lenders, and with the assistance of the New York City Bar. Banks will send representatives with true authority to negotiate a settlement. Homeowners will be represented by counsel. And hearings will be overseen by judges with authority to impose sanctions on uncooperative parties. As Judge Lippman promised: “There will be no more excuses, no more delays. Real negotiations will take place, and homeowners will leave the table with the best available offer.”

Judge Lippman should be applauded for his proposal. But we can’t forget: this should already be happening in every single case.

The CPLR instructs that every bank in a foreclosure mediation conference “shall appear in person or by counsel…fully authorized to dispose of the case.” Instead, banks are often represented by per diem attorneys with inadequate information about a case and no real authority to negotiate. Settlement conferences are rendered useless because the bank has lost documents or failed to respond to a loan modification request, and its lawyer has no ability to move the case forward. The new proposal is an important step, but it’s also a concession that banks currently ignore state law with impunity.

Appropriate and efficient resolutions are also prevented by the overwhelming number of unrepresented homeowners. According to a November 2011 court report, 67 percent of homeowners in settlement conferences did not have counsel. Each foreclosure case is a complex contractual matter, often with hundreds of thousands of dollars at stake. Each involves hundreds of pages of documents, technical legal claims and defenses, and complicated procedural requirements. No one who practices law would send a client into court on such a high-stakes matter without representation. Nowhere else does our adversarial system grapple with such difficult matters without counsel to set forth the facts and law.

What responsibilities do members of the New York bar bear in resolving this crisis?

First, we must urge Albany not to eliminate funding for the legal services and housing counseling provided by the Foreclosure Prevention Services Program.

As the general counsel of Citigroup testified in 2010, homeowners’ advocates help the entire system “work out solutions more quickly and without the need for repeated sessions.” New York has built one of the strongest foreclosure prevention networks in the nation. But the governor’s proposed budget eliminates the program entirely, effective March 31. The prospect of future funds from the “robo-signing” settlement is a hopeful sign, but doesn’t address the immediate need. Unless Albany restores this funding now, our state’s investment in infrastructure and expertise will be lost as programs lay off staff and shut their doors to homeowners. The burdens on the courts will escalate, dramatically.

Second, the private bar must get more directly involved. Valuable pro bono projects have been set up around the state. But our biggest law firms still need to participate. Conflicts with existing financial clients are a legitimate concern, but large firms routinely secure conflict waivers for paying clients; they should do so here. We should also look for creative ways to get more lawyers involved helping mediators and other court personnel. New York has a robust tradition of pro bono engagement, and it is time to focus more of that energy on foreclosures.

The “robo-signing” settlement terms promise more, and more effective, loan modifications. But we have learned from past settlements that they are only effective when individual homeowners are represented by advocates who can assert their rights. If we want these promises to be realized, we must provide these cases with the courts and lawyers they require.

The Brennan Center for Justice will host a foreclosure CLE program on Feb. 29 at 6 p.m. For more information go to