The Latest Problem With Foreclosures: Not Enough Lawyers?

 by:  Peter J. Gallagher

It is rare that you hear that the world needs more lawyers, yet this is apparently the case in connection with foreclosure proceedings in some states, at least according to a recent article in the Washington Post, "Foreclosures Trapped By A Lack of Lawyers." In the wake of the recent "robo signer" scandal, many lenders fired any law firm that had been representing them that was allegedly implicated in the scandal.  The problem is that these lenders have been slow to hire new counsel, and even when they have found replacements, it is taking  their new lawyers some time to get up to speed on the files.  These delays have created chaos in the courts because, as one defense lawyer noted, "nobody knows who's representing whom." 

Not surprisingly, the article focuses on Florida, which has been at the center of the foreclosure crisis since the start.  (You may be surprised to learn, however, that Florida is one of only 23 states that requires foreclosures to be processed through the courts.  New Jersey has a similar requirement.)  One firm, which had previously handled nearly 20% of the foreclosures in the entire state, has indicated that it is unable to file the necessary paperwork to withdraw from the 100,000 cases it is handling.  Other firms have refused to release files to their now former bank clients because they allege that they are owed millions of dollars in fees for work already performed.  (See here for an article reporting on a lawsuit between Chase and one of its former law firms over the return of foreclosure files.)  Even when these cases are reassigned, it will no doubt take weeks, if not months, for new counsel to make sense of the files they have inherited.  While this process plays out, borrowers are left in limbo, with nobody to communicate with regarding their lawsuits or any ongoing efforts to resolve them.  The chaos that this situation created led the Chief Judge in Palm Beach County to begin convening special hearings to reassign hundreds of foreclosure cases per day until the backlog is cleared, and to dismiss any cases where nobody appears on behalf of the banks. 

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