Use Of Consumer Attorneys To Unwind Predatory Loans

An article in California Progress Report by San Francisco-based civil rights attorney and journalist Michele Magar focuses on the important role played by consumer attorneys in providing legal assistance to those homeowners who find themselves under the burden of predatory loans, and the importance of increasing the ranks of consumer attorneys to take on predatory cases, as descibed in the following excerpts:

• Federal and state laws which offer statutory attorneys’ fees enable attorneys to help desperate homeowners restructure abusive loans into sustainable ones, rescind predatory mortgages altogether, and battle foreclosure rescue scams. Homeowners will have to rely on consumer attorneys in small firms because big firms often represent lenders.

• Under the federal Truth In Lending Act ["TILA"] (15 U.S.C. §§1601 et seq.), a homeowner may rescind a non-purchase loan secured by her primary residence (home equity and improvement loans and refi’s) for up to three years if her lender did not adequately disclose the terms of the loan, or the right to cancel the loan for three business days after the closing. “Ninety percent of loan documents I see have blank three-day rescission notices or contain other TILA violations,” said Dan Mulligan, a San Francisco attorney [with the firm Jenkins Mulligan & Gabriel LLP] who specializes in helping homeowners fight abusive loans. “A simple TILA rescission claim demand letter takes about four to six months to resolve, while lawsuits take 9 to 15 months, depending on the court’s backlog and how much of a fight the defense mounts.”

• “Sorting out winnable cases is not hard to do, but lawyers have to work on contingency or rely on statutory attorneys fees because typically clients have no money to pay up front to hire lawyers,” said Shirley Hochhausen. Hochhausen teaches a predatory lending clinic at the University of San Francisco School of Law and is co-counseling 36 cases with private practitioners via the Fair Lending Consortium, a Bay area group she organized to develop predatory lending expertise among private attorneys.

• “One way for attorneys to get familiar with this type of practice is to use our services for their first case or two, they can learn a lot in a short time and use it build a new practice area,” says John Van Alst, an attorney in NCLC's [the National Consumer Law Center] Washington, D.C. office.

• For attorneys who lack the resources to purchase manuals and hire consultants, Van Alst recommends co-counseling with legal aid attorneys. Most legal aid offices own the NCLC manuals, and are always in search of private attorneys to co-counsel cases both to increase the pool of attorneys available to help homeowners and also because federal regulations bar them from seeking attorneys fees. By co-counseling with private attorneys, legal aid lawyers can exert the same pressure to negotiate that private attorneys use: the persuasion of ever-increasing billable hours on statutory fee cases.

For more, see Right Now, Consumer Attorneys May Be the Best Hope for Californians Stuck in Predatory Loans.

For stories on consumer attorneys representing homeowners saddled with predatory home loans in a refinancing transaction, see Using Truth In Lending Act To Undo Bad Mortgage Loans. undo mortgage loans TILA alpha