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Facing foreclosure: do you need a lawyer?

Call it the Savage Untruth – bad advice from Sun Times personal finance columnist Terry Savage.

It’s probably not worth it for homeowners facing foreclosure to get a lawyer, she wrote last week.  “In most cases, an attorney can only delay – not eliminate – the prospects of foreclosure,” she wrote.

Since lawyers succeeded in uncovering widespread foreclosure fraud, “lenders and servicers have regrouped and will press forward.  So it hardly seems worthwhile to pay for a lawyer since now banks won’t proceed without proper documentation.”

Lots of observers are a lot less sanguine than Savage about the banks’ quick fix.  The banks’ “reassurance is not reassuring,” Susan Weber, real estate professor at the Wharton School of Business, told the Wall Street Journal.  State attorney generals denounced the rush to resume foreclosure, and judges say they are still finding errors, Huffington Post reports.  (“It’s nice of Bank of America to issue a press release,” said Justice Arthur Schack of the N.Y. State Supreme Court.)

Citing real estate attorneys, Gretchen Morgenson of the New York Times says banks can probably cure deficiencies in foreclosure papers, but it “will be costly and time-consuming, requiring banks to comb through every mortgage assignment and secure proper signatures at every step of the way – and it will surely take more than a few weeks, as banks have contended.”

And while Savage downplays the value of delay, delay caused by lawyers raising claims and litigating can help substantially, said Dan Lindsey of the Legal Assistance Foundation.  Delay can give homeowners leverage to negotiate a loan modification, and at the least it can buy time to prepare a smoother relocation, he said.

Many observers are also far less sanguine than Savage about banks’ willingness to make modifications.  She might check the coverage by the Sun-Times’s Fixer, Stephanie Zimmerman, who’s been helping homeowners who can’t get responses from servicers including Bank of America and Wells Fargo.   She says stories of “missing paperwork and conflicting directives from bank representatives” are common.

Lawyers do cost money for those not eligible for free legal services, and they aren’t going to be able to help in every case, Lindsey said.  In addition, the foreclosure crisis has attracted some lawyers who aren’t very experienced, he said.

But all homeowners facing trouble with their mortgages should meet with a counselor from a nonprofit housing agency, he said (call the HOPE hotline, 1-888-995-HOPE, to get an appointment).  A counselor may know when an attorney will be helpful and can make a referral.

In Cook County, homeowners facing foreclosure now can ask to be put in the Circuit Court’s foreclosure mediation program, and they’ll see a housing counselor and an attorney provided through the Chicago Legal Clinic.

In North Carolina, since the state began providing legal assistance to homeowners facing foreclosure, roughly one of every three mortgages has been found to have some substantial legal discrepancy, U.S. Rep. Brad Miller (D-NC) told Huffington Post.

“The fouled-up paperwork or other lack of legal compliance ‘has resulted in a much higher rate of negotiated [mortgage] modifications’ in North Carolina, said Miller. ‘It gave the homeowner additional defenses and counterclaims that strengthened their hands substantially.'”

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Category: foreclosures

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