The Work

May 22, 2009 3:31 PM

New York Fed to Convene Meeting on Foreclosure Pro Bono

Posted by Nate Raymond

Correction: An earlier version of this story carried the incorrect spelling for the last name of Cleary Gottlieb partner David Sugerman. We regret the error.

The Federal Reserve Bank of New York has summoned lawyers at some of the city's elite law firms and largest banks for a meeting Wednesday to discuss the low participation in a year-old waiver program meant to allow firms to handle foreclosure cases for homeowners pro bono.

Last May, the New York Fed teamed with The Association of the Bar of the City of New York on a pilot program that would let big-firm lawyers help residents facing foreclosure. At the time of its launch, the program, called the Lawyers Foreclosure Intervention Network (LFIN), stressed waivers for firms that represent financial institutions; the expectation was most of the lawyers would come from such firms. But a year later, the program's participants are largely solo practitioners and small firms, with only a couple lawyers from large firms.

Fed officials are now trying to figure out if there's a way to bolster participation. A copy of Wednesday's agenda, obtained by The Am Law Daily (download the document), outlines an array of possible fixes, including allowing lawyers at large firms to advise volunteer lawyers for the homeowners anonymously.

A Fed spokesperson had no immediate comment.

Among the law firms / lawyers expected to participate in Wednesday's meeting are: Davis Polk & Wardwell partner Carey Dunne; Simpson Thacher & Bartlett partner Thomas Rice; Wilmer, Cutler, Hale, Pickering & Dorr partner Noah Levine and counsel Sara Kelsey; Cleary Gottlieb Steen & Hamilton partner David Sugerman; Sullivan & Cromwell partners Michael Wiseman and Steven Peikin; and Orrick, Herrington & Sutcliffe pro bono counsel Rene Kathawala.

Of those firms, only Orrick has taken cases through the foreclosure program, according to Lynn Armentrout, director of the foreclosure pro bono program, the Lawyers Foreclosure Intervention Network. Sullivan & Cromwell has provided research assistance but has not taken cases, Armentrout says.

Banking officials expected to attend include JPMorgan Chase general counsel Steven Cutler; Citigroup Inc. general counsel Michael Helfer; Bank of America deputy general counsel Edward O'Keefe; and Credit Suisse deputy general counsel Neil Radey.

The two-page agenda says "some law firms believe it would be difficult to participate because the waivers have only been granted by a subset of the financial institutions they represent."

In those cases, the Federal Reserve proposes that firms seek the waivers on a case-by-case basis. The agenda also suggests program administrators may compile a list of banks that aren't signing waivers to ask them to reconsider.

In an interview earlier this month for an article to be published in the July issue of The American Lawyer, New York Federal Reserve general counsel Thomas Baxter Jr. suggested "positional conflicts" may be the principle impediment. (Baxter made similar comments to NPR-affiliate WNYC in an interview Tuesday.)

"What I mean by a positional conflict is the perception that if I take on a borrower facing foreclosure, then my bank clients who see me doing that are going to feel that I'm aiding the enemy," he said. "And because of that perception that I'm taking a position against them, then I'd rather not do that."

To address that issue, the agenda says participants will discuss whether lawyers at large law firms should make themselves available to advise volunteers anonymously.

"Under this framework, even a law firm that might otherwise have ethical conflicts to resolve should be able to provide considerable help to the LFIN volunteers without the need of a waiver from the relevant financial institution," the document says.

Nonetheless, the program's sponsors are seeking an opinion from the city bar association on such an arrangement, the document says. The New York Fed and city bar previously received an ethics opinion to certify the waiver program last year.

The other option, according to the document, would be for firms to allow their lawyers to participate in a secondment, or temporary placement, with LFIN. Those seconded lawyers could oversee deferred associates who may join LFIN.

"The experience of that lawyer could be leveraged by overseeing the work of several less experienced lawyers," the document says. "A lawyer is not associated with a law firm if any ongoing relationship between the lawyer and the firm is narrowly circumscribed and if the lawyer is effectively screened form the confidences of the firm's clients."

Still, if the firm is worried about positional conflicts, the New York Fed may be willing to institute controls in which only it and the program's director "knows the identity of the firm that the seconded lawyer may be associated with in the future."

Meanwhile, the city bar is preparing to host a training session for lawyers interested in volunteering for the foreclosure project. The training is scheduled for June 17-18.

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Do these people not read the New York Times? There are hundreds of lawyers trained to offer foreclosure assistance on a pro bono basis. The litigants are just not coming in. The default rate in some parts of New York reaches 90%. Outreach to the communities is what's needed. Yeesh.

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