Beyond balls and strikes: towards a problem-solving ethic in foreclosure proceedings.

• Author: Brescia, Raymond H.

ABSTRACT

Courts across the country are being saddled with a rapid escalation of foreclosure filings due to the fallout from the subprime mortgage crisis. Millions of homeowners stand to lose their homes in the United States in the next year, and hundreds of billions of dollars in home equity will be lost as a result by all homeowners, not just those in default on their mortgages. This Article assesses the impact of this wave of foreclosures on communities and the courts, and suggests that jurisdictions should adopt the techniques of those problem-solving courts already in existence: i.e., drug courts, mental health courts, community courts, and domestic violence courts. These techniques involve active judges in non-traditional roles engaging in systemic reform and close monitoring of litigant conduct while utilizing non-adversarial approaches and enlisting the assistance of interdisciplinary stakeholders. Such techniques are well suited to the foreclosure context, particularly given the nature and scope of the subprime mortgage crisis, and court systems should consider creating specialized foreclosure courts that can adopt a problem-solving approach to address the rapid rise in foreclosure proceedings.

TABLE OF CONTENTS I. THE PROBLEM-SOLVING APPROACH A. Definitions: Problem-Solving Courts and Therapeutic Justice B. A Brief History of Problem-Solving Courts C. Key Features of Problem-Solving Courts 1. Outcomes 2. Systemic Change 3. Active Judges in Non-Traditional Roles 4. Interdisciplinary Collaboration D. What (if Anything) is Wrong with the Problem-Solving Approach? E. Bringing the Problem-Solving Ethic to Conventional Courts II. KEY FEATURES OF THE SUBPRIME MORTGAGE CRISIS THAT MAKE THE PROBLEM-SOLVING APPROACH APPROPRIATE IN THE FORECLOSURE CONTEXT A. Steep Increase in Foreclosure Filings B. Community Impacts of the Subprime Mortgage Crisis ant Foreclosures C. Subprime Securitization and Barriers to Communication Between Borrowers and Lenders D. Value of Counseling and Social Services Interventions III. LEGISLATIVE AND JUDICIAL EFFORTS TO ADOPT PROBLEM-SOLVING METHODOLOGIES IN THE FORECLOSURE CONTEXT. A. A Note on the Foreclosure Process B. Problem Solving Efforts 1. Early Intervention/Communication 2. Mediation 3. Enhanced Funding for Housing Counseling and Other Interventions 4. Role of Governmental and Non-Governmental Experts in Bringing About Systemic Change 5. Active Judges IV. TOWARDS A COMPREHENSIVE, PROBLEM-SOLVING APPROACH TO FORECLOSURE PROCEEDINGS [A]nd I will remember that it's my job to call balls and strikes, and not to pitch or bat.

--Chief Judge John G. Roberts, Jr. (1)

In the wake of the subprime mortgage crisis, judges handling foreclosure proceedings are being asked to do more than "call balls and strikes." The fallout from this crisis is a growing challenge to the courts that must handle the influx of foreclosure proceedings that has followed the collapse of the housing market in the United States. It is predicted that over eight million American homeowners will be in foreclosure over the next four years, (2) and hundreds of billions of dollars in home values will be drained away from all homeowners due to the looming foreclosure fallout. When homes go into mortgage foreclosure, everyone loses: the entity that holds the mortgage, the borrower, neighbors, the courts, and the local and state governments that lose substantial tax revenue and must cope with devalued and even abandoned properties. Across the nation, states are adopting legislative reforms that will make the foreclosure process more effective in bringing parties together to reach optimal resolutions of these mortgage defaults, and courts are adopting new protocols to deal with the spike in foreclosure proceedings darkening their dockets.

In a previous article, I introduced the idea that court systems should create specialized courts to address the fallout from the subprime mortgage crisis; by using a so-called "problem-solving approach" to the rise in foreclosures that has followed the subprime crisis, I argued, courts could deal more effectively and efficiently with the impact of this crisis on individual litigants, banks, markets, and communities. (3) The present Article is an attempt to extend that analysis and assess efforts already underway that are, either intentionally or unintentionally, consistent with the principles of problem-solving jurisprudence.

In many ways, these efforts are attempts to modify how courts deal with foreclosure proceedings by addressing some of the features of the subprime mortgage crisis that have become barriers to effective judicial resolution of mortgage disputes. These barriers threaten to deepen the impacts of the crisis on the communities where these foreclosures are taking place. Since the worst of the subprime fallout has yet to hit the courts, I argue here that innovative modifications to the foreclosure process, undertaken in several jurisdictions to date and informed by problem-solving principles, are necessary to deal effectively with this crisis--to mitigate some of the consequences that are likely to befall homeowners, the courts, and communities if aggressive interventions are not adopted more broadly. I also argue that the consolidation of these approaches, to be carried out by specialized courts, will enable these courts to marshal the resources and focus the problem-solving approaches that have been introduced in an effort to make them as effective as possible.

In Part I of this Article, I will briefly review the literature on problem-solving courts, focusing on their history, key features, and principles. In Part II, I will review the state of the subprime mortgage crisis, paying particular attention to its relation to foreclosures and the manner in which courts handle those foreclosures. I will lay out the aspects of the crisis that lend themselves to resolution through problem-solving approaches. In Part III, I will provide an analysis of efforts in several state legislatures to modify their foreclosure procedures, and describe the manner in which courts in several jurisdictions are calibrating their protocols for handling foreclosure proceedings so that they might deal more effectively with these disputes and the influx of cases these courts face. I will assess these efforts, with the principles of problem-solving courts in mind, to determine the extent to which such principles can inform an effective and responsive approach to the subprime mortgage crisis. In Part IV, I will attempt to suggest ways in which these problem-solving features can be utilized effectively so that courts can address the fallout from the subprime mortgage crisis aggressively and comprehensively.

1. THE PROBLEM-SOLVING APPROACH

   1. Definitions: Problem-Solving Courts and Therapeutic Justice

      Any discussion of problem-solving courts will inevitably lead to a discussion of the concept of therapeutic justice. These are not identical concepts, however. (4) First, although they may take many different forms, problem-solving courts can be defined in their relation to more traditional courts as follows:

      Viewed in the aggregate ... it is possible to identify several common elements that distinguish problem-solving courts from the way in which cases are typically handled in today's state courts. Problem-solving courts use their authority to forge new responses to chronic social, human, and legal problems--including problems like family dysfunction, addiction, delinquency, and domestic violence--that have proven resistant to conventional solutions. They seek to broaden the focus of legal proceedings, from simply adjudicating past facts and legal issues to changing the future behavior of litigants and ensuring the future well-being of communities. And they attempt to fix broken systems, making courts (and their partners) more accountable and responsive to their primary customers--the citizens who use courts every day, either as victims, jurors, witnesses, litigants, or defendants. (5) On the other hand, therapeutic jurisprudence is sometimes viewed as the theory behind what judges in problem-solving courts do, (6) and has been described as follows:

      An interdisciplinary approach to legal scholarship that has a reform agenda, therapeutic jurisprudence seeks to assess the therapeutic and counter-therapeutic consequences of the law and how it is applied, as well as to increase the former and diminish the latter. It is an approach to the law that uses the tools of the behavioral sciences to assess the law's therapeutic effects and, when consistent with other important legal values, to reshape law and legal processes in ways that can improve the psychological functioning and emotional wellbeing of the individuals affected. (7) While it may be easy to conflate the two, (8) not all problem-solving courts practice therapeutic justice all of the time, and problem-solving judges are not the only judges that can utilize principles of therapeutic justice. (9)

      In the end, although judges in problem-solving courts may adopt principles of therapeutic justice and "the use of social science to study the extent to which a legal rule or practice promotes the psychological and physical well-being of the people it affects," (10) it is more likely that a discussion of the adaptability of the problem-solving model to the foreclosure context will not focus on what psychological forces might be at work in the mortgage context. Instead, I will focus on the types of external issues (as opposed to internal, psychological ones) that problem-solving courts, as such, are typically designed to address: the impact of the subprime crisis on litigants and the communities in which they live, community perceptions of the legitimacy of the courts and court processes, and the inclusion of interdisciplinary stakeholders in resolving the crisis.

   2. A Brief History of Problem-Solving Courts

      Many trace the origins of problem-solving...