Through a happenstance, Maine’s Pine Tree Legal Assistance program has emerged as a national leader in coping with the mounting plague of home mortgage foreclosures. A volunteer lawyer at Pine Tree chanced to take the case of a Denmark, Maine, woman that brought to national attention the sloppy paperwork and methods behind many mortgages.
The volunteer lawyer, Thomas Cox, suspected that Nicolle Bradbury’s foreclosure file was defective. He drew testimony from a “limited signing officer” for the lender, GMAC Mortgage, that he had been preparing 400 foreclosures a day and that neither he nor anyone else had examined them although he had sworn that he had done so.
This “robosigning” often had been standard practice, but suddenly it was admitted by a loan officer and recognized as a slipshod device that could throw millions of foreclosures into legal jeopardy. The disclosure caused the big lenders including GMAC, Bank of America and JPMorgan Chase to suspend their disclosures temporarily and then go on the defensive, as if their flawed procedures were mere technicalities.
These paperwork shortcuts were part of a frenzied second act of the housing bubble of the late 2000s. The collapse of home values left many owners “underwater,” with their property worth less than what they owed on their mortgages. Part of the trouble was that in the pell-mell market many had dared to buy their homes — or had been talked into buying them — with little or nothing down and with inadequate incomes to pay the monthly charges. And many mortgages were sold and resold and packaged into investment products so that ownership of the mortgages was hard to trace.
Now that millions are delinquent, lenders have been foreclosing frantically.
Maine is one of 23 states where a foreclosure must be approved by a court. A total of 5,841 foreclosure cases were filed in Maine courts in the last fiscal year, up from 2,100 in fiscal year 2005.
Nan Heald, executive director of Pine Tree Legal Assistance and Volunteer Lawyers Project, says that all of Maine’s legal aid providers could meet only 6 percent of the demand for legal assistance in foreclosure proceedings last year. Pine Tree faces severe operating deficits and is actively seeking additional funding from the state and federal governments and other sources.
The situation in Maine and the nation boils down to a struggle between borrowers who can’t pay on their mortgages largely because of the recession, and lenders and foreclosure processors, who are making money from the foreclosures.
Fortunately there is a middle ground. Machinery is in place to modify mortgage terms so that the borrowers may be able to keep up reduced payments, and the banks can get earnings that are reduced but still better than the hassle and often small return they would get by foreclosure and resale of delinquent properties.
In Maine, a 2009 foreclosure mediation program requires borrower and lender to sit down with a mediator and try to work things out. The first step for a troubled homeowner hit by a foreclosure notice is to telephone the foreclosure protection hot line: 1-888-664-2569.