Seeking A Pause In Foreclosures
Minnesota Lawsuit Tests Obama Policy Aimed At Distressed Homeowners
Jul 29, 2009
In another step to curb abusive lending practices and protect local consumers, attorneys from the Foreclosure Relief Law Project in St. Paul, Minnesota filed a class action lawsuit asking a judge to halt Minnesota foreclosures. The move comes on the heels of news that thousands of homeowners have lost their homes due to their applications being wrongly rejected by the Home Affordable Modification Program. Many more have lost homes due to a failure of the group to explain a homeowner's right to appeal.
Overview Of The Litigation
Attorneys for the Foreclosure Relief Law Project say the moratorium is needed so that the program can be properly evaluated. By stopping foreclosures, lenders and mortgage servicers could have the time they need to fairly process applications of distressed homeowners. In statements released to the press in connection with the suit, the Foreclosure Relief Law Project sees this as a matter of constitutional accountability, according to attorney Mark Ireland. "Not just because it's the right think to do to have transparency and accountability, but because it's required by the due process clause of the Constitution." According to Ireland, the lawsuit is modeled after the farm foreclosure lawsuits of the early 1980s which prompted safeguards for farmers' due process rights.
The Industry's Response
The Home Affordable Modification Program is a $75 billion dollar project launched by the Obama administration aimed at helping people struggling to meet monthly mortgage payments either because those payments have gone up or because their income has gone done, due to factors like high medical bills or a lost job. Qualifying homeowners have complained that despite efforts to work with lenders, it is the lenders who remain unwilling to work with homeowners.
Paul Leonard, a representative for the country's major lenders and services, is negotiating with the Treasury Department on addressing foreclosure issues. According to Leonard, it is not that lenders don't want to modify current mortgages, but rather, lenders are simply overwhelmed by the number of homeowners seeking help.
The Obama administration responded by announcing plans to improve the program by tracking applicant response times and to publicly report servicer performance starting next month. Ireland hope the suits creates a ripple effect. "My hope is that by bringing the lawsuit, pressing the pause button here in Minnesota, that the government will press the pause button everywhere and issue regulations and create safeguards to prevent people from falling thought the cracks."
In the meantime, industry insiders will be watching this litigation closely. A swift resolution could mean lenders are finally comfortable loosing credit lines, a key to getting the economy moving. Both consumer advocates and industry representative agree that prolonged litigation serves no one's interest and hope to meet somewhere in the middle.
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