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July 14, 2010 3:46 PM

Pro Bono 2010: Early Intervention

Posted by Terry Baynes

ForeclosurePrevention

Last year, Kathleen McLeroy, a real estate attorney at Carlton Fields, helped a Florida couple avoid foreclosure and hold onto their home. The couple could no longer afford their mortgage payments and had applied for a loan modification under the Obama administration's Home Affordable Modification Program (HAMP). But when they called Bank of America Corporation about their application, the couple said they couldn't find anyone to help them.

McLeroy took the case pro bono under the Florida Attorneys Saving Homes (FASH) program. The couple's application moved forward when McLeroy intervened. But even then the process was slow going. "What's supposed to be a very rapid turnaround was not," McLeroy says. "It took longer than it should have, and it took a lot of persistence, which was surprising to me." After six months, the couple finally obtained their modified loan.

Legal assistance programs, such as FASH, have surfaced across the country to combat the mortgage crisis. But it's been hard for many of them to attract pro bono help from large law firms--given the potential for conflicts of interest. Even if firms don't already represent a specific lender, they may not want to rule out future business opportunities.

To bypass the thicket of conflicts, FASH decided to focus on homeowners preforeclosure. Carlton Fields signed up for the FASH program soon after it launched. "We decided to participate because it wasn’t contested litigation but just negotiation of terms," says McLeroy. Carlton Fields does not represent Bank of America, one of the largest mortgage holders, and could work on those loans.

Another firm, Holland & Knight, found a way to participate in FASH by going directly to Bank of America--even though it's a client. The firm obtained a limited waiver from the bank, which allowed it to represent borrowers who had defaulted on their Bank of America loans. Under the agreement, the firm would end representation should litigation begin. "It was a win-win situation because Bank of America would rather have a performing loan on terms amenable to them than own real estate," says George "Buddy" Schulz, a partner and pro bono coordinator at Holland & Knight. Around 100 attorneys from the firm volunteered, many successfully renegotiating the loans. "We were able to keep a lot of people in their homes," says Schulz.

Attorneys from Fitzpatrick, Cella, Harper & Scinto have also devoted pro bono services related to loan modifications. Fitzpatrick serves as cocounsel with the Legal Aid Society on Edwards et al. v. Aurora Loan Services, LLC et al., a class action suit pending in federal district court in Washington, D.C. The complaint alleges that plaintiffs were denied loan eligibility evaluations under HAMP, although they met the minimum eligibility requirements.

The Legal Aid Society knew it would be difficult to find a firm willing to work on the case. "Many firms won't touch anything that has to do with a bank or lender because of actual or business conflicts," says Legal Aid Society lawyer, Oda Friedheim. Fitzpatrick was one of the few firms able to take the case. "We are an IP specialty firm, so our potential for conflicts is considerably narrower than general practice firms," says Donald Curry, partner and pro bono coordinator at Fitzpatrick.

Lawyers from Honigman Miller Schwartz and Cohn have found another way to address the foreclosure crisis in Detroit while avoiding conflicts. Mitchell Meisner, a partner at the firm who specializes in commercial real estate transactions, serves on a team of lawyers assembled to draft a working agreement between a borrower and a lender to extend the homeowner's or tenant's right of occupancy. The Detroit Office of Foreclosure Prevention and Response, alongside Community Legal Resources, spearheaded the ROOF (Retaining Occupancy on Foreclosure) Agreement project. The legal team has drafted one agreement for postforeclosure cases and is working on a second for preforeclosure situations.

"After lenders foreclose you end up with a large number of homes sitting vacant, abandoned, subject to looting, and contributing to blight," Meisner says. The agreements try to prevent foreclosure, vacancy, and the resulting neighborhood deterioration.

The initial legal team consisted of 15 people with expertise representing the interests of lenders, servicers of lenders, borrowers, homeowner and tenant advocates, and city agencies. Six lawyers, including Meisner, took the lead in drafting the agreements. "At the beginning, we talked about how we're the first legal team working without clients," Meisner says. "But we know our types of clients well enough generally to represent their interests." Periodically, members of the team would consult with their clients for input. The next step will be figuring out how to get the agreements to homeowners and tenants before they vacate their properties.

Dan O'Callaghan recognizes the importance of finding alternatives to foreclosure. He is a transactional real estate attorney at Michael Best & Friedrich and the cochair of the Dane County Foreclosure Prevention Taskforce in Wisconsin. This past February, the task force, in collaboration with the Dane County Bar Association and the University of Wisconsin Law School, launched a voluntary mediation program for lenders and borrowers. O'Callaghan reports a fourfold increase in the number of foreclosures in the last five years. "Although the rate of increase has slowed, the overall number of foreclosures in our community continues to climb," he says. “Even when it does level off, we still have a long way to recovery."


THE STATS

Carlton Fields ranked one 104th on this year's Pro Bono Report. Firm lawyers performed an average of 34.1 pro bono hours in 2009; 46.1% of the firm's U.S.-based lawyers contributed 20 or more hours.

Fitzpatrick Cella ranked one 181st on the report. Firm lawyers performed an average of 8.3 pro bono hours in 2009; 9.2% of the firm's U.S.-based lawyers contributed 20 or more hours.

Holland & Knight ranked one 99th on the report. Firm lawyers performed an average of 47.4 pro bono hours in 2009; 37.2% of the firm's U.S.-based lawyers contributed 20 or more hours.

Honigman Miller ranked one 157th on the report. Firm lawyers performed an average of 20.1 pro bono hours in 2009; 20.1% of the firm's U.S.-based lawyers contributed 20 or more hours.

Michael Best ranked one 142nd on the report. Firm lawyers performed an average of 26.4 pro bono hours in 2009; 25.7% of the firm's U.S.-based lawyers contributed 20 or more hours.


CLICK HERE to access the Pro Bono Report 2010 from the July/August issue of The American Lawyer.

Photo by John Moore/Getty Images - A housing counselor gives a workshop on  foreclosure prevention at a housing fair on August 22, 2009 in Thornton, Colorado.

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