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< | Jonathan: I've made some minor initial edits - but I will give some detailed feedback, and a rewrite May 10. |
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> | Jonathan: I did some edits and moving around today; still in progress. I'll continue to add stuff and write feedback over the next few days. Thanks! |
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Class Action Lawsuits to Enjoin Foreclosure: An Argument for Clinical Involvement |
| | A Problem: Foreclosures Without Adequate Legal Advising |
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> | The recent financial crisis has exposed a serious problem: foreclosures without adequate legal advising. Firms which engaged in a pattern of predatory lending, when borrowers are unable to keep up with payments, foreclose the houses right away.
An Approach: The Massachusetts Model
The Fremont Case
In Massachusetts, an interesting model of dealing with the problem has emerged. The Attorney General has obtained an injunction under a consumer protection statute |
| | On March 2, 2008, the Attorney General of Massachusetts obtained a preliminary injunction against Fremont Mortgage Group, a mortgage lending firm based in California that held approximately 3,000 loans in the Commonwealth of Massachusetts. |
| | The injunction requires Fremont, or any company that purchased a loan from Fremont, to submit these loans for review to the Attorney General's office before foreclosure. |
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< | Judicial bypass will only be granted on a case by case basis, and the cost to Fremont to have an individual case reviewed is so great that one practical effect of the law is a de facto moratorium on foreclosures that keeps 2200 people in their homes for the foreseeable future or allows them to renegotiate the terms of their mortgages on very favorable terms. |
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> | The Harvard Law School Predatory Lending Clinic |
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< | Investors and mortgage lenders in the Commonwealth and all over the country are bracing for more lawsuits, afraid that other state governments may try to follow the Massachusetts precedent. |
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> | A coalition of faculty-run, student staffed law clinics or externships, pro bono consumer protection attorneys, and unemployed recent graduates could band together to bring these lawsuits on behalf of affected homeowners. Clinics at law schools in every state could work together and with law firms to represent clients in class action suits against lenders to keep many thousands of people at a time from foreclosure. Indeed, Harvard Law already offers a Predatory Lending clinic that works with private practitioners to represent homeowners.
http://www.law.harvard.edu/academics/clinical/lsc/clinics/predatory.htm
Results
Judicial bypass will only be granted on a case by case basis, and the cost to Fremont to have an individual case reviewed is so great that one practical effect of the law is a de facto moratorium on foreclosures that keeps 2200 people in their homes for the foreseeable future or allows them to renegotiate the terms of their mortgages on very favorable terms. |
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< | What These Suits Can Do For Homeowners |
| | Lawsuits against mortgage lenders and banks are on the rise, but still the number of plaintiffs is not even close to the number of people who could possibly have a cause of action against a mortgage lender like Fremont. |
| | The benefit from a preliminary injunction to a homeowner is twofold: first, even if the suit is ultimately defeated and the foreclosure recommenced, the owner will have bought time to find a new job, secure new living accommodations, or simply blunt the effect of such a massive life change on his family. Second: it puts pressure on the lender to settle and renegotiate the terms of the lease, as long as the money gained from renegotiating is greater than the sale of the house minus the cost of fighting the suit.
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> | Generalizability
Investors and mortgage lenders in the Commonwealth and all over the country are bracing for more lawsuits, afraid that other state governments may try to follow the Massachusetts precedent. |
| | To bring one of these suits, a plaintiff would need an applicable consumer protection statute and a lawyer willing to take the case.
Although the Massachusetts Predatory Loan Practices Act is particularly plaintiff-friendly, other states have similar statutes that provide for causes of action and equitable relief against predatory lenders. |
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< | In New York, Banking Law 6-l has provided a cause of action for predatory lending (DLJ Mortgage v. Smith). Under an adequate consumer protection statute, the plaintiff would need a lawyer willing to take the case and see it through to the end. |
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> | Lawsuits such as Fremont have sometimes been brought by private practitioners, usually representing a single client. Class action lawsuits have also appeared in different jurisdictions- with these suits, it is possible to completely stop a company from foreclosing on any household that purchased a toxic loan. However, if attorneys don’t think they have a chance at winning, or think that the expected payout on the lawsuits doesn’t justify the time or expense, they will not want to take on the lenders or might settle too quickly. The major benefit of having the Attorney General’s office bring the case is that money is somewhat less of an issue, keeping homeowners in their homes provides a good public relations boost for that particular Attorney General. |
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< | Getting Law Students Involved |
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> | Prospects for New York
In New York, Banking Law 6-l has provided a cause of action for predatory lending (DLJ Mortgage v. Smith). Under an adequate consumer protection statute, the plaintiff would need a lawyer willing to take the case and see it through to the end. |
| | In Fremont, the Attorney General's Consumer Protection Office acted on behalf of the Commonwealth of Massachusetts and the homeowners who had been subject to predatory lending practices. It is unwise to rely on similar action by attorney’s general in other states. For one, banks and other lenders may spend enormous amounts of money to ensure the election of AG's who avoid these types of lawsuits. Taxpayers may not want their money being used to bail out people, even neighbors, who they consider to have acted unwisely. |
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< | Lawsuits such as Fremont have sometimes been brought by private practitioners, usually representing a single client. Class action lawsuits have also appeared in different jurisdictions- with these suits, it is possible to completely stop a company from foreclosing on any household that purchased a toxic loan. However, if attorneys don’t think they have a chance at winning, or think that the expected payout on the lawsuits doesn’t justify the time or expense, they will not want to take on the lenders or might settle too quickly. The major benefit of having the Attorney General’s office bring the case is that money is somewhat less of an issue, keeping homeowners in their homes provides a good public relations boost for that particular Attorney General. |
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< | A coalition of faculty-run, student staffed law clinics or externships, pro bono consumer protection attorneys, and unemployed recent graduates could band together to bring these lawsuits on behalf of affected homeowners. Clinics at law schools in every state could work together and with law firms to represent clients in class action suits against lenders to keep many thousands of people at a time from foreclosure. Indeed, Harvard Law already offers a Predatory Lending clinic that works with private practitioners to represent homeowners. Perhaps a clinic, or a temporary project closely resembling a clinic, could be introduced here at Columbia. |
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A Columbia Law School Clinic or Project?
Perhaps a clinic, or a temporary project closely resembling a clinic, could be introduced here at Columbia.
A coalition of faculty-run, student staffed law clinics or externships, pro bono consumer protection attorneys, and unemployed recent graduates could band together to bring these lawsuits on behalf of affected homeowners. Clinics at law schools in every state could work together and with law firms to represent clients in class action suits against lenders to keep many thousands of people at a time from foreclosure. Indeed, Harvard Law already offers a Predatory Lending clinic that works with private practitioners to represent homeowners. |
| | Spots in Columbia's clinical program are in high demand, reflecting a desire of students for more hands-on legal education. The law school should expand its clinical program, including unemployed or deferred recent graduates into the mix, and the current state of the legal job market may force them to do this. Clients are becoming aware of a new balance of power in the legal services market, and they no longer want to pay for inexperienced associates, a problem for firms who are used to training their associates during the first few years on the job. If firms value graduates with better legal writing, research, and judgment than they are getting now, and students demand more clinical experience, the law school will have no choice but to offer these programs. When that happens, law students across the country could play a significant role in repeating the success of the Fremont lawsuit. |
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< | -- JonathanWaisnor - 17 Apr 2010 |
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General Comments
One thing that I think would be generally helpful would be to make more use of linking; the original didn't have any links. The purpose is not necessarily to cite sources for the sake of citing sources, but to connect the reader to other resources that might interest her. The web, and wikis in particular, are media that are designed to facilitate these kinds of links.
Another area where there is room for improvement is giving more of a big picture sense of the problem and potential solutions. A reader learns that there is some sort of foreclosure problem in MA, and that MA has a law that could help, and then there's a discussion of how Columbia could add a new clinic, since there's a high demand here for clinical training. I think the dots could use some more connection.
Starting "in media res" with a description of the Massachusetts injunction has a certain zip to it, but I think starting out with a description of the broader problem may help orient a reader who is not familiar with litigation in this area. |
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You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable. |