Starting a Foreclosure Prevention Unit

in Your Legal Services Program

Kirsten Keefe Josh Zinner

E i Justice
Empire J ti Center
C t N i hb h d Economic
Neighborhood E i Development
D l t
119 Washington Ave. Advocacy Project (NEDAP)
Albany, NY 12210 73 Spring Street, Ste. 506
(518) 462-6831 New York, NY
kkeefe@empirejustice.org (212) 680-5100
josh@nedap.org

Goals of Training
To give basic tools to set up, manage and
support lawyers in a legal services
foreclosure prevention unit.

We will focus on the bigger picture but

provide an overview of the foreclosure
process and legal issues.

The Importance of Foreclosure

Prevention Work
Losing a home is unlike losing any other
asset.
The home is more than a place to live.
Foreclosures affect communities
communities.
Over 90% of foreclosures end in a default
judgment.
A lot of people got scammed.

1
 Subprime Mortgage Lending
Overview
How we got to where we are today

Why so many people ended up in loans they

cantt afford
can

Securitization what it means and practical

consequences

Multiple parties involved

General Expectations for Your

Foreclosure Prevention Project

There is a steep learning curve in this area of

law

This is rapidly changing world with new

products, new laws, new regulations developing
monthly.

There are several statutes but not a huge body

of case law to rely upon

General Expectations cont.

Your program needs to have a long-time

commitment to doing this work.

More complex cases may take years to

resolve.

2
 General Expectations cont.
Foreclosure cases are time-intensive

For cases that are being actively litigated, it is

difficult for a case handler to handle more
than 4 or 5 at a time.

Case handler may simultaneously work on

less complex cases.

Staffing
Considerations for choosing staff for this work
Attention to detail is necessary
Case handler must have tolerance for large cases
with heavy discovery burdens
Those who like instant gratification may be frustrated
Be mindful of potential conflicts if folks are coming
from the real estate industry
Dedicate lawyer to do this work full-time
If possible, hire paralegals to do intake and
litigation support work

Cases involve:
Interviewing the client
Reviewing loan documents and calculating
violations
Research, consultation with others
Pleadings, discovery, depositions and potentially
hearings
For subprime loans, there will be a mandatory
settlement conference
Negotiating with the lender (loan modification)
Cases rarely go to trial

3
Frustrations for case handlers
may include:
Obtaining necessary documents
Finding the owner of the loan
Finding third parties (broker, closing agent)
Piecing the story together
Working with the mortgage servicer
Working with the lender/lenders attorney
Lack of good options
Becoming overwhelmed supervision important

Intake - Part 1
Initial intake done by phone or in-person
Get basic facts about homeownership,
income, reason for default and the loan
Get basic storyy
May be done by paralegal
Expect to take 20-30 minutes
Note: These are confusing transactions, it
can take additional time to get the facts and
story from the homeowner.

Intake Part 2
Refer to lawyer
Instruct homeowner to come with all
documents received at closing, recent
statements and p proof of p payments
y
Lawyer will need to do follow-up interview with
client to get the full story
Expect to take 1-2 hours

*Sample intake form

4
 Designing Intake to Deal with a
Heavy Volume of Calls

Consider dedicated intake line for

foreclosure requests

Designate intake paralegal or lawyer and

provide them with training; provide
repeated trainings, as well.

Evaluating Case Merit

Things to consider:
Time homeowner has lived in home,
investment in home, age of homeowner,
circumstances of home and housing
g
alternatives in community
Whether a purchase money mortgage or a
refinancing
Legal claims and defenses
The story behind the loan

Income Guidelines

How to maintain the flexibility needed to

assist
i t working
ki h homeowners iin fforeclosure.
l

5
 Start Slowly
Avoid cases in the beginning that involve
complex predatory lending schemes, with
multiple parties

Focus on cases which involve negotiations

on discrete issues

Scenario 1: Homeowner is in
Foreclosure
What is needed:
Intake get the documents and the story
Legal analysis of claims
If within 20/30 days of service, file answer with
potential counterclaims; may have to sue third parties.
If default judgment entered already
already, move to vacate
judgment and/or potentially file motion to restrain
plaintiff from moving forward with sale.
Settlement Conference
Will likely have to respond to motion for summary
judgment
Discovery

Scenario 2: Homeowner in default

but not yet in foreclosure
What is needed:
Intake get the documents and the story
Legal analysis of claims
Analysis of best course for homeowner:
affirmative case, defend a foreclosure,
bankruptcy, or sell home/other option.
Potential referral to housing counselor or in-
house assistance with loss mitigation.

6
Scenario 3: Homeowner current on
payments
What is needed:
Intake get the documents and the story
Legal analysis of claims
Potential affirmative lawsuit
Referral to housing counseling agency or in-
house assistance with getting a loan
modification, refinancing or other option.

The Foreclosure Process

*See foreclosure chart

Overview of Claims and

Defenses
Federal claims
TILA and HOEPA
RESPA
ECOA
Civil Rights
g claims
State law claims
Banking Law Secs. 6-l and 6-m
Fraud, unconscionability, contract defenses
UDAP (General Business Law Sec. 349)

(*Refer to chart for more complete list)

7
 Forum
State court where most cases will be, filed as
foreclosures

Federal District court potential venue for

affirmative cases

Bankruptcy court may be beneficial forum for

homeowner based on total debt load, statute of
limitations and/or servicing problems

A Note on Bankruptcy

Chp. 13 bankruptcy can be an effective tool for a

homeowner to save a home.

Changes are likely on the horizon (at the federal

level) which will make bankruptcy court a more
favorable forum for distressed homeowners.

Legal services need to be ready to take on this

challenge which will entail training, purchase of
manuals and the BR code and software.

Related Legal Issues for

Homeowners

Foreclosure Rescue Scams

Deed theft
Foreclosure
F l consultants
lt t
Tax foreclosures
Quiet title issues

8
 Monitoring and Evaluation
Design or adapt case management
system to track lenders, brokers and other
third parties

Identify issues requiring systemic change

Consider potential referrals to the NYS

Office of the Attorney General, the NYS
Banking Department or local DA

Resources for Lawyers

National Association of Consumer Advocates (NACA)

Cost: $50 per lawyer, may be waived for legal services
Listerves: Mortgage listserve (as well as other topical listserves);
NY NACA listserve
Other resources: Pleadings sharing (bank being developed)

National Consumer Law Center - manuals

Cost: 18-volume set is $1,090; $840 for LSC programs
On-going cost for updates
To oder:
https://shop.consumerlaw.org/index.asp?PageAction=VIEWCATS&
Category=2

9
 NY Resources for Lawyers
Settlement Conference Workgroup
Statewide workgroup of legal services and housing
counselors to address concerns regarding the new
settlement conference procedure.
To join, send email to Kirsten Keefe at kkeefe@empirejustice.org.

New Yorkers for Responsible Lending Coalition (NYRL)

Convened by Neighborhood Economic Development
Advocacy Project (NEDAP) to address financial justice
issues in New York. The focus of the coalition is to
organize, educate and advocate for policy change on a
range of financial justice issues including mortgage
lending and foreclosure.

Housing Counseling Agencies

Housing counselors are trained professionals
who work with homeowners and negotiate with
lenders
Creating
g strong
g relationships
p between legal
g
services and counseling agencies is essential
Counselors will be a source of referrals develop
procedures to streamline referrals
Counselors can provide valuable assistance to case
handlers, even after the case has been referred

Opportunities for Private Bar

Involvement
Programs have had limited experience getting
private lawyers to represent homeowners pro
bono in foreclosure defense cases
Issue include: conflicts, prolonged and complex
litigation, and complicated subject matter.

Greater potential to involve private lawyers to

represent defendant homeowners for the limited
purpose of the Settlement Conferences

Issue: Your lawyers may end up having to

spend time to provide support to private lawyers.

10
 Trainings
*Training should be offered repeatedly over time to track
federal and state developments

Through the DHCR funding, Empire Justice Center along

with other legal services programs, will be conducting
free trainings throughout the state over the next 2 years
years.
2 day intensive basics training to be held regionally
January through April 2009
Half to one day litigation updates training to be held
approximately every 3 months will be available in
person and on the web.
Paralegal training may be offered regionally in 2009
through the training advisory board.

Trainings continued
NCLC and NACA conduct invaluable trainings on
foreclosure defense that are recommend:
Intensive foreclosure conference (around September)
Annual consumer rights litigation conference (late
October)

*Scholarships are available and they try to keep costs

down for legal services lawyers.

Attorneys Fees
Many consumer statutes include fee-
shifting provisions

Att
Attorneys fees
f can be
b an important
i t t piece
i
of the negotiation to settle the case

11
 Retainer Agreements

Retainer agreements should be carefully

worded regarding attorneys fees to try to
limit tax liability for the client

5 Next Steps
1. New lawyers and paralegals should sign up for
two-day intensive training early in 2009
2. Purchase NCLC manuals
3. Join NACA
4. Sign up for:
- NACA mortgage listserve,
- Settlement Conference workgroup listserve
5. If paralegals are doing intake, provide training
regarding interviewing skills

12