Taxpayer-funded entitlement to foreclosure defense?
New York chief judge Jonathan Lippman floats a highly dubious idea that would build toward that even more dubious program of full employment for lawyers known as Civil Gideon. [NY Times, Alkon]
Considering the huge handouts that people don’t pay their mortgage already receive (http://www.irs.gov/individuals/article/0,,id=179414,00.html — they’re excused from income tax on forgiven debt, and they’re not taxed on imputed income from the months they didn’t pay their mortgage), it’s simply not fair to hand them more taxpayer dollars to hire fancy law firms. These folks made out like bandits!
I spent several hours today–and I have a CPA and an attorney that I pay for–doing routine compliance work for my Corporation for federal, state, and County reporting requirements.
Can’t these people who thought their real-estate investment would pay off handsomely take their time and money and pay for legal help, as any other businessman would? Even if I lose money in a given year, I’m still responsible to pay my attorneys. Why do failed real-estate investors get more sympathy than other (more legitimate, I might add) businessmen?
The NYT article said that lawyers for homeowners facing foreclosure would be provided by legal aid societies and lawyers willing to work pro bono. Doesn’t Judge Lippman know that legal aid societies are able to serve only a tenth of those who request it of them? How would he multiply the number of lawyers who work pro bono? The solution is to make foreclosure proceedings a matter of equity instead of law, like U.S. bankruptcy court. Equitable contracts still upheld, but the inequitable ones, which the homeowner signed without reading and without legal advice at the closing, risk rejection.
Judges Posner and Easterbrook said that they signed their real-estate closing documents without reading them; I doubt they wasted money on an attorney in the process. Jack Olson would hold them naive victims of inequitable mortgages.
“How would he multiply the number of lawyers who work pro bono? ”
Tax the heck out of contingency attorney fees in excess of $10,000 so they could pay for more legal aid attorneys. I suggest a rate of 99.98% on all contingency amounts over 10k. After all, with the flood of graduates from 2nd and 3rd rate law schools, this would provide “gainful” employment for the newly graduated but only marginally useful mass of lawyers – or at least earn them enough to pay off their 100k of student loans. đŸ™‚
On a serious note: Jack – just what do you think that (matter of equity vs. law) would do to the availability of funding for mortgages – if they could be tossed out like yesterdays trash, like a credit card debt can in bankruptcy? Yes….that’s right, the interest rates on a mortgage would be about the same as a credit card.
And what do you think would happen, then, when lenders to cover their collective butts make it a mandatory part of the closing costs that the buyer / borrower prove they paid for an hour or four with an attorney (you know, so the whole thing would be “equitable”)? Oh…what, you mean my closing costs are even higher? (Shock horror at the thought – it MUST be the greedy bankers jacking up the costs – quick, we need a law to stop them!) Buyer / Borrower: “What’s this form I have to fill out proving I had a lawyer to advise me?” Why, no friction added to an already high friction / high transaction cost situation in real estate.
But no matter….it’s only those poor folks or first time buyers who it’ll really hit hard – those on the margin, those that COULD make it work but for the extra costs. But hey, that’s ok – they’re probably too poor to buy a house anyways. (Snark on that last part, of course).
“To whose benefit?” there Jack Olson (to steal a question from Of Two Minds). Sounds like the lawyers would make out quite well. Sounds like the homeowners / borrowers would pay the bill.
@no name guy, if mortgage interest were higher houses would be affordable as house prices would fall. Interest rates are being kept artificially low to prop up house prices (and to punish savers).
8 Comments
There’s a great way to avoid “losing” your “home”. It’s called paying your mortgage.
There is a group here in Wisconsin promoting civil Gideon. Very bad idea.
Considering the huge handouts that people don’t pay their mortgage already receive (http://www.irs.gov/individuals/article/0,,id=179414,00.html — they’re excused from income tax on forgiven debt, and they’re not taxed on imputed income from the months they didn’t pay their mortgage), it’s simply not fair to hand them more taxpayer dollars to hire fancy law firms. These folks made out like bandits!
I spent several hours today–and I have a CPA and an attorney that I pay for–doing routine compliance work for my Corporation for federal, state, and County reporting requirements.
Can’t these people who thought their real-estate investment would pay off handsomely take their time and money and pay for legal help, as any other businessman would? Even if I lose money in a given year, I’m still responsible to pay my attorneys. Why do failed real-estate investors get more sympathy than other (more legitimate, I might add) businessmen?
The NYT article said that lawyers for homeowners facing foreclosure would be provided by legal aid societies and lawyers willing to work pro bono. Doesn’t Judge Lippman know that legal aid societies are able to serve only a tenth of those who request it of them? How would he multiply the number of lawyers who work pro bono? The solution is to make foreclosure proceedings a matter of equity instead of law, like U.S. bankruptcy court. Equitable contracts still upheld, but the inequitable ones, which the homeowner signed without reading and without legal advice at the closing, risk rejection.
Judges Posner and Easterbrook said that they signed their real-estate closing documents without reading them; I doubt they wasted money on an attorney in the process. Jack Olson would hold them naive victims of inequitable mortgages.
“How would he multiply the number of lawyers who work pro bono? ”
Tax the heck out of contingency attorney fees in excess of $10,000 so they could pay for more legal aid attorneys. I suggest a rate of 99.98% on all contingency amounts over 10k. After all, with the flood of graduates from 2nd and 3rd rate law schools, this would provide “gainful” employment for the newly graduated but only marginally useful mass of lawyers – or at least earn them enough to pay off their 100k of student loans. đŸ™‚
On a serious note: Jack – just what do you think that (matter of equity vs. law) would do to the availability of funding for mortgages – if they could be tossed out like yesterdays trash, like a credit card debt can in bankruptcy? Yes….that’s right, the interest rates on a mortgage would be about the same as a credit card.
And what do you think would happen, then, when lenders to cover their collective butts make it a mandatory part of the closing costs that the buyer / borrower prove they paid for an hour or four with an attorney (you know, so the whole thing would be “equitable”)? Oh…what, you mean my closing costs are even higher? (Shock horror at the thought – it MUST be the greedy bankers jacking up the costs – quick, we need a law to stop them!) Buyer / Borrower: “What’s this form I have to fill out proving I had a lawyer to advise me?” Why, no friction added to an already high friction / high transaction cost situation in real estate.
But no matter….it’s only those poor folks or first time buyers who it’ll really hit hard – those on the margin, those that COULD make it work but for the extra costs. But hey, that’s ok – they’re probably too poor to buy a house anyways. (Snark on that last part, of course).
“To whose benefit?” there Jack Olson (to steal a question from Of Two Minds). Sounds like the lawyers would make out quite well. Sounds like the homeowners / borrowers would pay the bill.
@no name guy, if mortgage interest were higher houses would be affordable as house prices would fall. Interest rates are being kept artificially low to prop up house prices (and to punish savers).
Ah, for the days when cigarettes could legally advertise on TV…..and lawyers could not…..