Published: November 2007

Legal Assistance for Families Facing Surge in Foreclosures

New Institute for Foreclosure Legal Assistance (IFLA) will provide support to groups giving legal representation to families facing foreclosure and financial ruin because of abusive subprime mortgages.

Recognizing that one of the biggest barriers families face to avoid losing their homes is the lack of access to quality legal services, the Center for Responsible Lending (CRL) has launched a new institute that will provide funding and training to organizations that help homeowners negotiate alternatives to foreclosure.

The project,  made possible by a $15 million grant from investment management firm Paulson & Co. Inc., will be managed by the National Association of Consumer Advocates (NACA). The majority of the funds will be grants to support direct legal assistance to borrowers in 10 or more states to fight foreclosure, predatory lenders and abusive loan servicers. It will do this primarily by providing money to top non-profit legal-aid groups and law school clinics.

Formation of the Institute comes as the rate of subprime foreclosures, already alarmingly high, is set to accelerate. Analysts have predicted that as many as 1.7 million foreclosures will occur in the next two to three years. Within the next eighteen months, up to four million subprime borrowers will see their monthly mortgage payments jump approximately 40% as initial “teaser” interest rates expire. Servicers and lenders have largely refused to modify these abusive subprime loans. According to a recent study by Moody’s, only 1% of loans that reset to a higher interest rate were modified by servicers. Lenders and servicers are simply not modifying these mortgages in sufficient numbers to help homeowners.

“Legal resources available to help struggling families fall far short of that needed to address the millions of abusive loans that have been made in recent years,” said Martin Eakes, chief executive officer of CRL. “By providing funding and other support for attorneys who can review loan documents and negotiate with loan servicers, we believe that many more homeowners will be able to stay in their homes.”

NACA executive director Ira Rheingold will manage the new Institute. “In many cases, families need legal help to keep their homes. We hope to be able to help provide legal representation to at least 5,000 families with these funds so that families can keep their homes,” he said.

The Institute should be up and running within a few months. It will be headquartered in Washington, DC at the offices of CRL and NACA.

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Crime/Legal   ♦   Fraud/Scam   ♦   Housing   ♦