Thu, Dec 9, 2010
By Stephen Witt
The calendar posted outside the courtroom Wednesday in the Brooklyn Civil Supreme Court lists page after page of foreclosures; a total of 79 separate cases will be heard on this morning alone. (See map of 4,000 homes in foreclosure in Brooklyn.)
The plaintiffs are all corporations, mostly large U.S. banks with familiar names like Wells Fargo and Citigroup and JPMorgan Chase. The calendar lists the banks’ attorneys, a cottage industry of freshly-minted law school grads who work on a per diem basis to chase down money so recklessly lent during the housing bubble.
The defendants are individuals, homeowners from Brooklyn who are facing the loss of their homes. The calendar lists their attorneys as well, often a name from a non-profit legal aid society. But take a closer look, and you’ll see something surprising. In nearly half the cases, the attorney’s name is the same as the defendant.
With the legal aid societies overwhelmed by foreclosure clients, and the court system buried in housing paperwork, an increasing number of at-risk homeowners have no choice but to hire the cheapest lawyer around: themselves.
Legally, the concept is known as “pro se”, translated from the Latin as “for oneself.” A typical pro se defendant is Sharon Robinson, who has come to the court on this day in an attempt to block foreclosure proceedings on her Canarsie home.
“I can’t afford a lawyer,” she says. “I have to do this myself.”
Robinson is a small woman in a puffy coat who carries her legal documents in a Key Foods shopping bag. She works as a pastry chef for a catering company in Manhattan and has no legal background.
Robinson is attempting to qualify for a loan modification, under a program offered by the Obama administration.
“It’s a drawn-out process,” says Robinson. “The banks are not really willing to help.”
If she can correctly navigate 30 pages of paperwork in less than 90 days, she might be able to legally force the mortgage servicer to reduce her rates. But she’s up against a nightmare of bureaucracy, and though this is her sixth time in court, she still hasn’t got the paperwork filed.
“It’s virtually impossible to fill out these papers correctly, even with a lawyer,” says Lewis Douglass, a judicial hearing officer. He estimates there are nearly 15,000 cases currently filed in the system, and they’ll take years to clear. Douglass, a spry, dapper man with combed-over shock white hair, is a former judge who has come out of retirement to help clear its backlog of foreclosure cases.
Laurie Izutsu, a lawyer and housing advocate with South Brooklyn Legal Services, says there is little Legal Services can do to help untrained homeowners like Robinson.
“We’re seeing a lot of cases like this,” she says. “We can help them on background, but in the court they’re on their own. “
Legal Services publishes a pamphlet to guide homeowners through the foreclosure process. Entitled “How to Answer A Foreclosure Complaint ‘Pro Se’ (Without an Attorney),” the pamphlet provides defendants like Robinson with sample court filings, registration deadlines and the basics of preparing a legal defense.
Even with a lawyer, Robinson’s case would be a tough one. She bought her home in Canarsie in early 2007 for $650,000, funded entirely by two adjustable-rate mortgages with no down payment. The interest on her loans quickly ballooned, and she now owes a whopping $5,000 a month in mortgage payments, but makes only $42,000 a year. She supplements her income by renting out the first floor of the house. But even if she wins an aggressive modification discount she still will be contributing over half her net income to service the debt.
“I’ve thought about leaving the house,” she says. “I’ll put it out on short sale if I have to.”
Not all pro se defendants are so desperate. Zia Chaudry bought his house in Bensonhurst for $540,000 in 2004 with a 10 per cent down payment, supplemented by a fixed-rate mortgage from Chase. But lured by easy credit, in 2006 he cashed in his equity, and then some, with an additional $150,000 credit line. Now he’s underwater; the total debt attached to his home is more than it is likely worth.
But, unlike Robinson, Chaudry has not intention of letting go. He’s making good money as a contractor, and thinks he can wait out the housing bust till the market recovers.
“The house was in bad shape,” he says. “I got that loan to renovate it. Now it’s nice. I’d even sell it for $650,000, if I could.”
In court, however, Chaudry seems lost. He immigrated to the United States from Pakistan in 1985 and his English isn’t perfect. Douglass, the retired judge who’s handling his case, explains his points slowly and repeats them with increasing impatience.
Chaudry could qualify for the modification program, if only he’d get the paperwork right. But the application is a forbidding 30-page morass of legalese. In several places it requires notarized pay stubs, which cannot be more than 90-days old. Miss the 90-day window and you have to start all over again.
“I want to pay my loan,” says Chaudry. “I don’t want to take it to my grave.”
Complicating the modification program are the banks themselves, which often own the mortgages in complex collateralized trusts. A mortgage like Chaudry’s might have been sliced into several different cash flow streams and sold to investors around the globe. That makes tracking down the loan origination documentation difficult, and without those papers the loan can’t be modified.
“The banks have brought these foreclosure proceedings, but oftentimes you’ll find they don’t have the documents,” says William Davis, another judicial hearing officer. Davis, like Douglass, is a former judge who has come out of retirement to help the city clear its backlog of foreclosure cases.
Davis says pro se defendants, lacking legal experience, have a harder time tracking down their loan paperwork, which is difficult enough in any case. And until the loan is modified, the bank holds all the power.
“It’s hard to say if the banks are making this deliberately confusing, but you get suspicious,” says Davis.