Legal News

Judges Taking On Foreclosures: Activism or Necessity?

By Jennifer Forsyth

The holidays are supposed to be a time to help those in need. And in the parts of the country that remain mired in a prolonged housing crisis, many thousands of people remain at risk of losing their homes to foreclosure and thus are in need of help. A handful of judges have begun to come to homeowners’ rescue. Now these judges aren’t replacing their robes with a sheriff’s badge and chasing the evil lenders out of town. But they are acting aggressively toward lenders in a handful of cases that the WSJ’s Amir Efrati details in today’s Law Journal.

This is as it should be, at least in most cases, says Raymond Brescia, an assistant professor at Albany Law School who has written about the role of the courts in the financial crisis. Brescia believes judges can play an important role in helping to solve the country’s housing problems — as long as they don’t cross the line.

No doubt, the overwhelming majority of foreclosure cases before U.S. courts are in essence rubberstamped by the judges in favor of the mortgage companies, in part because the foreclosures are largely uncontested by the borrowers.

However, there is a category of cases in which judges have begun to act in a way that might be interpreted as aggressive, in that they demand lenders and mortgage companies follow the rules to the letter if they want to win in court. “I don’t think that’s a crazy idea,” Brescia says. “To expect plaintiffs to prove their case is what the judicial system is founded on.”

Furthermore, Brescia points out, judges long have had the power to sanction parties to a suit whose tactics appear abusive or who appear not to negotiate in good faith. So judges who have sanctioned lenders for not showing a good faith effort to work with troubled borrowers are acting within the historic powers and traditions of the court, he says.

Yet, there may be another category of judges, Brescia says, in which the judge decides he or she will favor borrowers regardless of the merits of the case. That runs counter to the traditional, legitimate role of the court and in fact might only trigger a backlash from legislators or regulators to rein in activist jurists. To decide to help borrowers without considering the specifics of the case “will undermine the integrity of the judiciary and that’s not going to help anybody,” says Brescia.

The WSJ’s story today says that at least one judge has been admonished for appearing to favor borrowers. In September, a Florida state appeals court ruled that a lower-court judge, Valerie Manno Schurr, erred in routinely delaying foreclosure sales by several months and making clear that she didn’t want to see people lose their homes. Her reasoning put concern for the homeowners ahead of the law, the appeals court said.

Judge Manno Schurr didn't respond to the WSJ’s requests for comment.

Full post as published by Law Blog - WSJ.com on December 24, 2009 (boomark / email).