As long as the Lawyer is cheaper than the Mortgage

Last year it made big news when an Ohio judge stopped foreclosures since lenders could not prove who actually owned the loans. That legal argument has made its way into New Jersey courtrooms. As this article from the Star-Ledger called Lawyers' tactic slows rate of forfeited houses in New Jersey explains. Very informative article, read the whole thing, but here are some snippets -

Judges in at least four New Jersey counties already have halted foreclosures, using a federal court ruling in Ohio as precedent. And with 48,000 foreclosures expected to be filed this year -- twice the number filed in 2006 -- some attorneys believe challenging foreclosures can become a large and potentially lucrative area of practice.

"This is starting to creep up all over the state and all over the country as people start to realize these banks don't really know who owns the (promissory) note," said Peggy Jurow, a senior attorney at Legal Services of New Jersey, which is teaching lawyers how to represent pro bono clients in these cases. "It's scary to think how many people are losing their homes who shouldn't be."

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"These lawyers are trying to grasp on the smallest legal issue, and they're losing sight of the justice involved," said Ralph Casale, a Denville-based attorney who has represented lenders in foreclosure for more than 30 years. "It comes down to this: Were you given the loan? Have you paid it? If you haven't paid it, doesn't the person who loaned you the money have the right to collect?"

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"The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance," he wrote. "Finally put to the test, their weak legal arguments compel the court to stop them at the gate."

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Neither side argues that borrowers don't ultimately owe money to someone. But homeowners fighting their foreclosures appear to have bought themselves time.

The counties where the foreclosures have been stopped so far are Passaic followed by Essex, Monmouth, and Ocean. If people can find lawyers to do this work pro bono they are doing well. However lawyer fees can add up fast and in some cases people have to figure off how they are best off.

Some interesting numbers from the article - 96% of the foreclosures were not challenged by defendants and 75% could have been successfully challenged. That 96% of the population felt if the foreclosure process started they were out of luck. No challenges just giving the house back to the lender. Stories of legal challenges and people living in their homes in the state of legal limbo are increasing.

The other side is that many people felt taken advantage of by the lenders. They already feel the system is rigged to work against them. Maybe as word spreads that one can fight and beat the system large numbers of people will begin challenging these cases.