Hope: A call to leadership in the foreclosure fraud crisis

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 meant to assure the integrity of documents for matters of great import 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 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. Our president, whom I believe is well-intentioned, can now take a step further, and he needs to.

I urge President Obama to 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 of a “Mortgage Foreclosure Strike Force,” a plan that would not require Congressional approval and that will do the following:

1. 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, to review foreclosure documents assigned to them based on requests of current or former homeowners whose homes are at risk of foreclosure. The supervising attorneys would be paid 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 work of the law students would be at no charge. The supervising attorneys would certify by affidavit their conclusions and provide them to both the Strike Force and the homeowner. Foreclosures would proceed as mandated by state law, but the conclusions of the Task Force would become powerful evidence in judicial proceedings and help those in nonjudicial states seek redress.

2. For Americans who’ve already experienced foreclosure, where the process has been certified to be faulty, the trustee would develop a process 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.

3. 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 our country could do in 2008 by bringing people together. Now it’s time for him to do it again.