LEGAL REMEDIES:LOCAL GOVERNMENT STRATEGIES TOMITIGATE NEGATIVE EFFECTS OFFORECLOSURES ON COMMUNITIES

September 24, 2008

Mark IrelandSupervising AttorneyForeclosure Relief Law Project,a program of the Housing Preservation Project

Disclaimer

There isn’t one remedy. There isn’t onesolution. There are many remedies and manysolutions that all have to be marshaled toaddress the biggest economic crisis since theGreat Depression.

It should also be noted that housing is just onepiece of a larger problem with unsustainablespending and debt in United States ofAmerica.

A New Way ofThinking

A new way of thinking…

Traditionally we think of a problem property(singular), and our ordinances and relatedlegal and administrative responses aredesigned to only deal with one property at atime.

The traditional system is inadequate in ourcurrent housing market. It is inefficient andoften ineffective.

Don’t just think of one…

2700 Penn Ave. N. 2717 Penn Ave. N. 2720 Penn Ave. N. 2724 Penn Ave. N.

Concentration of Ownership andResponsibility

If a property search is done related toneighborhoods or communities thathave been hard hit by the foreclosurecrisis, it is likely the first time in historythat approximately six to twelve people(corporations) control such a highpercentage and amount of real estatein such neighborhoods.

Why legal remedies?

Why?

OrderPro-ActiveLeverage

ORDER

ORDER

Public Interest, Impact LitigationOften Brings Structure and OrderTo Complex Situations.

Traditional Banking Model

The New Model

PRO-ACTIVE

PRO-ACTIVE

Re-Active Policies and Apathy Are TheEnemies.

Every day a property sits vacant it makes it moredifficult to turn it around and make it a communityasset again.

The need for us to be pro-active…

We are the community experts. We know theareas that have been affected, have relationshipswith non-profit and community organizations, andwill best be able to craft the right solutions.

The free-market, for all its benefits, does notconsider community or public needs.

We don’t have two years or five years.

Foreclosures will continue forforeseeable future…

LEVERAGE

Communities and neighborhoods need leverageto address these common problems…

A systemic approach to quickly evaluate andsell REO property;

Accountability for the care and maintenance ofproperty;

Swift payment of assessments, fees, andproperty taxes; and

Responsiveness to our foreclosure preventionefforts to avoid the vacant houses in the firstinstance.

Litigation Approaches

Front End

Back End

(And somewhere in between)

Front End Litigation

Front End Litigation focuses on the practicesimmediately prior to and at the origination ofthe loans that ultimately resulted inforeclosure.

Potential legal claims, include, but are notlimited to allegations of discrimination ordisparate impact under the Fair Housing Act orstate law, as well as negligent or improvidentlending and nuisance.

Examples of front-endlitigation… The City of Baltimore v. Wells Fargo, an

example of a case alleging violations of thefederal Fair Housing Act

The City of Cleveland v. 21 lenders andissuers of Mortgage Backed Securities, anexample of a case alleging nuisance due tothe financial institutions failure to abide byprudent underwriting standards.

Hawthorne Area Community Council v.CitiMortgage, an example of a case alleging“negligent lending” that damaged theneighborhood.

Back End Litigation

Back End Litigation relates to the conduct afterthe Sheriff’s Sale and Foreclosure, relating themaintenance of the property and the effect thatthe vacant property is having on the city.

Examples of back-endlitigation… City of Minneapolis v. TJ Waconia, an example of a

lawsuit alleging a private nuisance and seeking reliefunder the Tenant Remedies Act or civil receivershipstatute

Hawthorne Area Community Council v.CitiMortgage, an example of a lawsuit allegingcommon-law and public nuisance.

Buffalo, an example of a lawsuit alleging publicnuisance related to 57 vacant properties.

City of Saint Paul Initiative, an example of pre-litigationattempt to address boarded and vacant property in thecity related to the top six major lenders.

Somewhere in-between…

Litigation efforts to stop or slow the process offoreclosure, and force servicers to behaverationally in an irrational environment.

Examples of “somewhere in-between”…

The City of Philadelphia, through its courtsystem, forces all foreclosure actions relatedto owner-occupied properties into mediation---prior to the foreclosure being finalized.

Five Things You Need To Do RightNow Read and revise your ordinances.

Make sure there is a vacant property registration and feerequirement, as well as regulations related to how avacant property will look and be maintained.

Prioritize Code Enforcement To FacilitateHome Ownership

Create Financial Products For HomeownersWith Damaged Credit

Create or Bond For a Scattered Site RentalProgram

Think About Alternative Uses For VacantProperties.

If you have questions in themeantime, contact me…

Mark IrelandSupervising AttorneyThe Foreclosure Relief Law ProjectA Program of the Housing Preservation Project(651) 642-0102mireland@hppinc.org