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Midyear Meeting 2009

Lawyers Face High Learning Curve During Real Estate Crisis

Posted Feb 13, 2009 4:34 PM CDT
By James Podgers

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There's a new foreclosure in the United States every 13 seconds. So, doing the math, during the 90-minute program "Foreclosing on the American Dream" at the ABA Midyear Meeting in Boston, some 400 foreclosures were initiated nationwide.

And while there's a sense of urgency to address the problem and develop effective strategies, the response by policymakers and lawyers practicing in the field is a work in progress, according to speakers at the program, which was sponsored by the ABA Commission on Homelessness and Poverty.

Meanwhile, the mounting numbers of foreclosures around the country are having a domino effect on other issues. In Massachusetts, for instance, foreclosures on condominiums outnumber those on single-family houses, which triggers problems for owners of nearby units and condo associations, said Kurt James, director of Rackemann, Sawyer & Brewster in Boston. Foreclosures also are threatening more tenants of rental properties, said Jeremy Rosen, executive director of the National Policy and Advocacy Council on Homelessness, based in Washington, D.C.

And foreclosures are dragging down entire neighborhoods, said Stephanie M. Smith, a community development policy analyst in Garden City, N.Y. “Neighborhoods are being demolished and vacated not just because one homeowner moves out, but because the neighbors are moving, too,” she said.

So far, efforts at the federal and state levels to help property owners have had spotty success. The panelists pointed to the Federal Housing Administration's HOPE for Homeowners program approved by Congress in 2008 as a particular example of the futility of some of these efforts.

The program “is a poster child for what not to do,” Rosen said. The problem, he and other panelists said, is that the program, which is designed to help homeowners at risk of foreclosure to refinance their mortgages under more affordable and sustainable terms, contains a long list of criteria that make it very hard for homeowners to qualify for it. As a result, hardly anyone is participating in the program.

Rosen noted that the Obama administration is developing plans for a new homeowner assistance program with some $50 billion in funding from last year’s Troubled Asset Relief Program bailout package approved by Congress. “I’m pretty confident that we’ll see a program that’s better than HOPE for Homeowners,” he said.

Meanwhile, many lawyers are scrambling to adjust on the run to new legislation and assistance programs along with court decisions that are changing the landscape of real estate law. But even as the law changes, certain tried-and-true approaches still are effective in representing clients who are facing losing their homes, the panelists said.

“Consider all sorts of options with your client,” said Jasleen Anand, a real estate attorney in Garden City, N.Y. “No two situations are alike. Look at the lender agreement and try to negotiate a resolution that is short of foreclosure. In the end, it’s a business decision being made by the banks.”

But as rapidly as real estate law is changing right now, it’s also “déjà vu all over again,” James cautioned. “It is cyclical,” he said. “Eventually, things return to the status quo ante, and you sort of forget what you went through—until the next downturn.”

Corrected at 4 p.m. Saturday to note that the speaker said there is a foreclosure every 13 seconds in the U.S.

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