Once again President Obama finds himself faced with a catastrophe created by a combination of big business interests and poor federal regulatory oversight. White House advisor David Axelrod said today that the administration is pressing lenders to accelerate their reviews of foreclosures to determine problems with documentation. Last week I urged a call to action to tell President Obama not to sign H.R. 3808. That bill would have loosened notary paperwork requirements for foreclosing on mortgages, already shown to be lax and in some instances, even fraudulent.
Fortunately, President Obama "pocket vetoed" the bill two days after the call to action, "foreclosing" the bill's chances of becoming law. Had the bill been signed into law, it would have made it easier for lenders and servicers to skip the notarization safeguards in many states' requirements meant to assure the integrity of documents for matters of great import and sensitivity such as foreclosures.
Mr. Axelrod said, "Our hope is this moves rapidly and that this gets unwound very, very quickly." There's the rub--right there. The Obama administration is talking about waiting on the nation's lenders to: 1) review mortgage foreclosure documents in which they have an interest, 2) decide which ones are problems, 3) correct the paperwork (their own employees and attorneys performed it poorly or illegally in the first place--so now they are supposed to do it right?), and 4) convince the American public that everything is okay now.
The "hope" that so many voted for in 2008 can be supplied by the current administration's exercising of decisive yet careful leadership. The President's veto of H.R. 3808 gave so many beleaguered Americans a first glimmer of hope in what has been an American nightmare. Finally, when the president vetoed H.R. 3808, one was chalked up for the little guy or gal, but it's not enough. Our president, who I believe is well-intentioned, can now take a step further, and he needs to.
I urge President Obama not leave this one up to big business. It's too critical. Government has been complicit in this fiasco, and the American public has begun to figure this out.
Now is the time for bold and creative leadership by the president. A nationwide moratorium sounds great to many, but Mr. Axelrod is correct that it would stop valid foreclosures from going forward. Moreover, state laws govern foreclosure proceedings, and anything but a voluntary moratorium by lenders and servicers would likely be stalled by state and federal litigation over states' rights. Instead, I propose the creation through the U.S. Department of Justice a "Mortgage Foreclosure Strike Force," a plan that would not require Congressional approval and that will do the following:
- Appoint "Foreclosure Review Task Forces" in each of the federal judicial districts comprised of qualified private practice attorneys appointed by the U.S. District Attorney for each district who have not previously represented those from the lending/servicing industry. These private practice attorneys would train and supervise the work of second and third year law students working through their law schools in the districts, to review foreclosure documents assigned to them based on requests of homeowners or former homeowners whose homes are at risk of, currently in or have been the subject of foreclosure within the district. The supervising attorneys would be paid, based on an hourly rate, from federal funding and/or a combination of voluntarily paid funds from the nation's foreclosers, with funds held in escrow by a trustee appointed by the DOJ. The law schools would be compensated for expenses, but the work of the law students would be at no charge. The supervising attorneys would, within two weeks of completion of review, certify by affidavit their conclusions (with any required waiver of confidentiality by the homeowner), providing their conclusions to both the Strike Force and the homeowner. Foreclosures would proceed as mandated by state law, but the conclusions of the attorneys with the Task Forces would become powerful evidence in judicial proceedings and help those in nonjudicial states seek redress, either before a court or before the federal Strike Force.
- For Americans who've already experienced foreclosure and the sale of and eviction from their homes, where the process has been certified to be faulty, the trustee would develop a process (much like a class action suit) for aggrieved persons to apply for and obtain some form of compensation from the fund without having to go to court, a process many Americans cannot afford. The most egregious abuses would be referred for criminal prosecution by state and federal authorities and to the state licensing bodies for attorneys.
- Voluntary participation in the Strike Force's activities by lenders and servicers would make them eligible for certification, in consultation with the Attorney General of the state involved, of the lender's or servicer's practices in preparing foreclosure documents for a particular state. Once a lender's or servicer's document practices are certified, mortgage foreclosures with documents executed after the date of certification would enjoy a presumption of having been executed according to law, unless there is proof that the practices as certified were not observed.
The last thing President Obama should do is to wait for hope. He must seize it for the American people and answer this call to leadership. He showed what a country could do in 2008 by bringing people together. Now it's time for him to do it again.