Foreclosure, and Planting the Seeds of a Future Crisis

To get a sense of how badly the legal system has responded to the foreclosure crisis, consider this:  we are three years into it, hundreds of thousands have lost their homes, states like Florida are running outrageous special foreclosure courts where retired judges aim to process 200 foreclosures per day -- and only now are actors in the system beginning to ask whether the parties seeking foreclosure and eviction actually have standing.

Standing is -- or should be -- question #2 in any legal proceeding (right after jurisdiction).  But in Florida, here are the questions that are asked, according to the Wall Street Journal, no less:

"'Case No. 136,' the clerk intoned. 'Wells Fargo versus Edward Callahan.'

Judge Carlin asked whether the man was living in the house and was current on his mortgage. He answered no to both questions.

'Your house will be sold in 45 days,'' said the judge. 'That's all for today.'

Case time: 15 seconds."

Public interest lawyers like Prentiss Cox here in Minnesota have been fighting a lonely battle for a long time, trying to get courts to demand that parties attempting to foreclose demonstrate standing.  A handful of judges, like Judge Arthur Schack in New York, have occasionally demanded this absolutely basic threshold issue be resolved first.  But they are tiny grains of sand in the foreclosure machine. 

But maybe -- maybe -- people who take the rule of law seriously are finally beginning to be heard. 

The New York Times reports today that the U.S. Trustee is beginning to demand that foreclosers demonstrate standing in bankruptcy cases.  That news isn't amazing; what's amazing is that it is news. 

I spend a lot of my time researching property rights restitution issues.  I've often argued that restitution is among the most complex and important issues in the world of property rights today.  Complex, because once someone has been wrongfully dispossessed of property, restoring it to them becomes almost impossibly difficult over time; important, because few things create as much lasting bitterness as the wrongful dispossession of property (see, e.g., crisis, Israeli-Palestinian). 

One day, we may well look back at the foreclosure crisis and ask, to paraphrase David Byrne, 'my god, what have we done?'

Mark A. Edwards

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