Now that the dust has started to settle on the foreclosure crisis, it’s clear that the dysfunctional legal framework of the financial system underwrote the heist of the nation’s wealth by Wall Street’s profiteers. Now, victims of the subprime disaster find themselves on the wrong side of the law again, deprived of critical legal assistance for protecting their homes. A study by the Brennan Center for Justice frames the foreclosure crisis as a failure of the legal system as well as the economy. Legal aid offices have been deluged with calls for help, and in many areas–especially in the poor neighborhoods most deeply affected by foreclosures–most people struggling with bad mortgages end up going it alone in court. Some examples from the report:
In New York, 84 percent of defendants in proceedings in Queens County involving foreclosures on "subprime," "high cost" or "non-traditional" mortgages (which are mortgages disproportionately targeted to low-income and minority homeowners) proceeded without full legal representation…. In Stark County, Ohio, heavily impacted by foreclosures, data suggests that 86 percent of defendants facing property foreclosure did not have counsel in 2008.
Poor homeowners may find it virtually impossible to navigate convoluted financial laws, particularly if their mortgages were built on scams or fraud. A good lawyer could make or break a case, but according to the report, an estimated “80 percent of the civil legal needs of low-income people go unmet.” Yet, as with subprime lending, the seeds of the crisis were sown years ago, when conservative lawmakers decimated civil legal aid for the poor by slashing funding and restricting attorneys’ ability to advocate for families. The Brennan Center explains that under the anti-government crusade launched in the mid-1990s (around the same time that Congress overhauled the welfare system), the law was literally written against the poor:
Abusive lenders enjoy a full arsenal of legal tools, while homeowners relying on restricted legal aid attorneys are barred from joining class actions, claiming attorneys’ fee awards, or relying on their attorneys to advocate before legislatures and administrative bodies. Congress, through the 2008 Housing and Economic Recovery Act, provided one-time funding for lawyers to help foreclosure victims, but then explicitly prohibited the lawyers it had funded from engaging in any litigation.
The communities most devastated by foreclosures, who have the most to lose when they go before a judge, have the least access to justice, says the Brennan Center. For Black and Latino households at the precipice of poverty, the scales of justice are pivoted toward the institutions that drove them to the edge in the first place.
Because lenders targeted low-income, Latino, African-American and other minority groups for subprime loans, there is also an explicit–and dramatic–race and class component to the current crisis. In these communities, a downward spiral can well be expected: the rolling contagion of layoffs and service cutbacks is hitting low-income and minority communities with disproportionate impact. Increased homelessness and poverty are likely to exacerbate an already intolerable crisis of civil representation, one that has a particular impact on low-income, minority communities and that has been stoked by chronic funding shortages…
Courts are often provide the last chance for relief for struggling debt-strapped families, but legal barriers have exacerbated their disenfranchisement. If a family loses their home because they can’t afford a lawyer, even bigger legal problems may follow: if they’re forced to move into a rental under a crooked landlord, they’ll be hard-pressed to defend themselves in court against an unjust eviction. And if they’re pushed onto the streets, how would they cope with the next legal crisis—an abusive boss withholding wages, the terror of domestic violence, or family separation through the child welfare system? The Brennan Center argues that lawmakers could help prevent this downward spiral by investing in and expanding the scope of legal aid services (a good first step would be passing the recently introduced Civil Access to Justice Act). The foreclosure epidemic is rooted in socioeconomic barriers that have undermined poor communities of color for generations. If the government can’t immediately give them access to social equity, it must provide access to the resources they need to defend what they have left. Image: "James and Tasha Alberti listen as Tasha’s father Charles tells the press the pain Bank of America caused his family when, despite getting a $45 billion bailout, the bank foreclosed and, without warning, evicted them – parents, four children and two grandchildren." (David Bacon)