Foreclosure glut causing lawyer shortage

The pileup of foreclosure cases glutting local courtrooms has exposed a growing problem with the legal system: There just aren't enough lawyers to go around for all the struggling homeowners who need the help.

Now, advocates for expanded legal aid - services that provide lawyers for those who can't afford to hire their own - are appealing for reforms at both the federal and state level.

The idea seems to be gaining traction in Maryland. Last week, Gov. Martin O'Malley introduced new legislation that would make mediation mandatory. The bill would require mortgage companies to participate in renegotiations of loan terms with homeowners before resorting to the legal process of foreclosure.

Not only does O'Malley want all cases to first go through mediation, but he wants the mortgage companies to carry the costs associated with it.

In Anne Arundel County, foreclosure filings have been high for the entire year. According to county Circuit Court statistics, there were 276 foreclosure cases in September and 298 in August. Those figures are far higher than the totals for those same months in 2008 and 2007.

The total foreclosure filings for the year to date in the county is nearly 2,300, and Circuit Court Clerk Robert P. Duckworth said it's likely the year will end with an all-time high of more than 3,000 foreclosure cases.

Anecdotally, Duckworth said he felt certain a majority, if not almost all, of the individuals facing foreclosure proceedings in county courts don't have representation.

"Which says they probably can't afford to hire an attorney if they can't afford their mortgages," he said.

Advocates of civil legal services have said representation in foreclosure cases provides an immense advantage for the homeowners. Lawyers can utilize consumer-protection laws, spot infractions of state and federal laws, pressure lenders to settle loan terms, and extend proceedings to allow homeowners time to make new living arrangements.

Staff members at the Maryland Legal Aid Bureau, a private nonprofit law firm for low-income people and seniors, said they are feeling the impact of a difficult economy. The bureau has 13 offices across the state, including one in Annapolis on Hanover Street.

In the past 12 months, the bureau has seen a 64 percent increase in caseload over the same period one year before. Cheryl Hystad, the bureau's director of advocacy, said a portion of that increase is the result of the foreclosure crisis, though landlord evictions, loss of health care coverage and other economy-related legal problems are all contributors.

Hystad said that, while legal aid is in demand for foreclosures, the bureau can only help those who meet certain qualifications.

"We can only represent folks who are poverty-level and below," she said. "There are a lot of people who aren't eligible for legal aid but still need the help."

Hystad said the bureau supports a mandatory mediation law and believes it could significantly lessen the problem.

Duckworth added that mortgage companies' voluntary initiation of mediation has resolved many cases before they ever had to enter the courts. Without this effort on the front end, he said, the judicial system could be backed up with even more foreclosure filings.

"In essence, that's been the assistance a lot of people have received," Duckworth said.

Last November, O'Malley announced agreements with six mortgage companies to create a loss-mitigation process for struggling homeowners.

Though mediation was never mandated through the deal, the participating companies agreed to give residents an answer within 75 days of submitting a negotiations package and to stop foreclosure actions and penalty fees during that time, among other forms of assistance.

Federal reforms

Melanca Clark, a legal counsel at the New York City-based Brennan Center for Justice, is one of many advocates lobbying for changes in laws so more people in foreclosure could access legal resources.

Clark said one of the obstacles to reaching distressed homeowners is a federal issue. In 2008, Congress imposed restrictions on the Legal Services Corp., the major federal source of funding for civil representation, that advocates say inhibit local agencies from engaging in litigation. Through those cuts, legal services funding has been reduced by a third.

The restrictions prevent legal-services agencies from participating in class-action lawsuits, pursuing statutory attorneys' fee awards and advocating for lending reform. Clark said all of these restrictions are legal tools that could be used to combat predatory lenders.

For example, the Maryland Legal Aid Bureau, the only agency in the state that receives the federal legal-services funds, receives only about 20 percent of its funding from federal grants. Regardless of the fact that a small portion of its funds comes from the government, all of its funds fall under the federal restrictions.

"It's like a poison pill," Clark said. "The restrictions impact all of their spending."

Sen. Barbara Mikulski, D-Md., who is the chairwoman of the U.S. Senate Commerce-Justice-Science Appropriations Subcommittee, has introduced language for the fiscal 2010 appropriations bill that would lift those restrictions on nonfederal funds.

Pro bono work

Locally, Chauncey Hall, program director of Arundel Community Development Services, said he sees firsthand the difference legal representation makes for clients.

His agency, staffed with four counselors, helps struggling homeowners develop a plan of action, whether that means household budgeting, refinancing mortgages or asking for revised loan terms. And when the cases are too advanced in the foreclosure process, staff members work with other organizations to find legal aid for their clients.

"A lot of times we see people who have waited until the last minute for help or have a very complex case," Hall said. "What we do is we work with several pro bono attorneys."

But nowadays, Hall said the free lawyers to whom they typically refer clients are faced with a backlog of cases. And that's unfortunate, he said, because in his experience, having legal representation is an invaluable commodity for people who want to keep their homes.

"The legal documents that clients have to sign are very difficult," he said. "They really need someone to help explain it in laymen's terms. Sometimes at a settlement table, there are 100 pages out in front of them, and they say, 'Just sign it.' "

During last week's Pro Bono Week in Maryland, O'Malley praised the 7,000 lawyers statewide who already participate in pro bono activities. But he stressed that more help was needed, especially for the state's "Foreclosure Pro Bono Project," a program designed by the Department of Housing and Community Development to train more attorneys in foreclosures.

So far, 900 attorneys have trained in the program, and 643 of them have offered their free services to homeowners.

Hall said at a time when homeowners are just walking away from their houses, legal experts are vital in educating residents about their rights.

"That lawyer is someone who is looking out for their clients' best interest before they sign on the dotted line," Hall said.