Banking Law

Miami Law Grads Get $10K Foreclosure Fellowships to Fill Legal Services Gap

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New legal tactics are showing promise for some homeowners in foreclosure, if only they had lawyers to help.

The shortage of foreclosure lawyers has reached “emergency proportions,” Time magazine reports. As many as 86 percent of homeowners in foreclosure in hard-hit areas last year didn’t have a lawyer, according to a report by the Brennan Center for Justice at New York University law school.

Bar associations, legal-aid agencies and at least one law school are scrambling to provide lawyers for homeowners facing foreclosure who can’t afford representation.

A new program sponsored by the University of Miami School of Law aims to help. It is providing $10,000 foreclosure defense fellowships for eight graduates to help legal aid groups tackle backlogs of cases. Miami law professor Michael Froomkin says many homeowners aren’t aware of legal defenses, including the claim that it’s unclear which company owns the securitized mortgage.

The New York Times reports that the proof of ownership claim succeeded in a recent bankruptcy case in the Southern District of New York. On Oct. 9, Judge Robert Drain eliminated a $461,263 mortgage debt on property because PHH Mortgage couldn’t show it owned the note. PHH also admitted that it had levied an improper $450 foreclosure fee and had overcharged interest, according to the story.

Carolina Lombardi, a senior lawyer at Legal Services of Greater Miami Inc., told Time that lenders often make exorbitant escrow claims in foreclosure cases, and lawyers are needed to protect homeowners.

The Wall Street Journal (sub. req.) reports on another legal tack. Some homeowners are asking courts to force mortgage servicers to consider them for the government’s foreclosure-rescue program. One federal lawsuit in Minnesota is asking for a halt in foreclosures until the Obama administration adopts a formal appeals process for homeowners who say they were wrongly excluded from the program.

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