April 11, 2013
Careful When Putting Shoe on Other Foot
Nestor Davidson has posted a very useful article to SSRN, New Formalism in the Aftermath of the Housing Crisis. The article notes that as “borrower advocates have responded to [the] surge in mortgage distress, they have found success raising a series of largely procedural defenses to foreclosure and mortgage-related claims asserted in bankruptcy.” (391)
Davidson points out that this “renewed formalization in the mortgage distress system is a curious turn in the jurisprudence” because from “the earliest history of mortgage law, lenders have had a tendency to invoke the hard edges of law’s formal clarity, while borrowers have often resorted to equity to obtain a measure of substantive fairness in the face of such strictures.” (392)
What I particularly like about this article is that it takes the broad view on downstream (homeowner foreclosure and bankruptcy) litigation. Instead of painting a pointillistic portrait of all of this “mortgage distress” litigation (a standing case here, a chain-of-assignment case there), Davidson identifies a pattern of formalistic defenses being raised by homeowners and puts it into historical context.
Davidson warns of the potential unintended consequences of this development: “The borrower push to emphasize formalism in mortgage practice, however understandable, may thus give primacy to the set of judicial tools least amenable to claims of individual substantive justice.” (430)
I don’t think that I agree that this new formalism will bite homeowners in the end. As Davidson himself acknowledges, “formalism need not be equivalent on both sides . . ..” (430) But I do agree with his conclusion:
For those concerned about the long-term structural balance between procedural regularity and substantive fairness embodied in the traditional realms of law and equity, the brittleness that the new formalism may be ushering in is worth considering and, perhaps, cause for redoubling efforts to find structural solutions to a crisis that even now continues. (440)
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Tried to read it… but it smacks to much of the point of view that only those elitists “in the know” understand the underlying realities of Real Estate Financing and the effects it has on the overall populace. What’s so hard to understand about Million dollar paychecks for those who did nothing more than push around paper? How does it feel to be “assumed to be a lessor?” I personally believe the author hasn’t spent enough time learning the intricacies of computers and database management. The Lenders… wealthy and getting wealthier by the day… seem to want the rest of us to ignore the obvious… not only did they NOT do their jobs… entering the data. crossing their T’s and dotting their i’s as they so certainly required the populace to do.. the also committed the act of GIGO… that’s Garbage In = Garbage Out. In their own arrogance and search for personal greed they decided to inflate their own personal earnings (and those of their close allies) by engaging in speculation, with our money, committing fraud, forging important documents, making absolutely rediculous bets (again with our money and now backed by our money)… and all to personally benefit… and now, they want to try to shift the attention from their own felonious behavior with dissertations about the difference between a fromal process for mortgages and an informal one. Well I gotta tell you… gathing all that paperwork for those mortgages, jumping through all of those hoops… that was a formal process. And doing your job as the Law requires is the cost of your job. You took the job, you stole the money. You can put lipstick all over that pig but in the end… it’s still a damned pig… and you’re still a Felon.