Froomkin on Foreclosure Prevention

I wanted to highlight an effort by University of Miami Professor Michael Froomkin to create public interest positions designed to help those in South Florida facing foreclosure:

[I am] trying to get one problem (the lousy market for law graduates) to help solve another (South Florida’s foreclosure crisis). . . . South Florida is ground zero for the national foreclosure crisis. The courts and the legal system are overwhelmed by this legal tsunami. In all of 2006, fewer than 10,000 foreclosures were filed in the Miami-Dade courts. In the first month of 2009, more than 6,000 foreclosures were filed in those same courts . . . and the rate of foreclosure filings has increased since then. . . . This is an unprecedented legal crisis for our community. As the Daily Business Review recently put it, “thousands of families are being displaced. Some end up on the streets or in shelters.”

As George Packer’s article The Ponzi State noted, “government oversight of the real-estate market was so negligent that more than ten thousand convicted criminals got jobs in the mortgage industry.” Riddled with fraud, the housing market in Florida recapitulated the 1920’s boom and bust that John Kenneth Galbraith described. Now a welter of interests on Capitol Hill are likely to make an already formidable legal landscape ever more complex.

Given Katherine Porter’s work on the dubious fees that are a staple of the foreclosure landscape, I applaud Froomkin’s effort to improve the legal prospects of homeowners in distress. As Dean Baker has testified, even the sea of money now unleashed by the Fed probably won’t be enough to prop up housing markets there:

In some of the most bubble-infected markets, like Phoenix, San Diego, Los Angeles, and Miami, the rate of price decline is closer to 30 percent. By every measure, inventories of new homes, inventories of existing homes, and vacant ownership and rental units, there is an unprecedented excess supply of housing. As a result, it is almost inconceivable that house prices will stop deflating in these markets any time soon.

I think Baker’s “right to rent” proposal is a sensible one. (As Stephanie Stern has shown, the “benefits of ownership” have been greatly exaggerated by housing policy makers.) But given the unlikelihood of its adoption, proposals like Froomkin’s are probably the best way to level the playing field between homeowners and the powerful banking lobbies now influencing policy on Capitol Hill. He’s accepting donations for the program at Discourse.net.

Via: Brian Leiter.

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