“We do not have to tolerate abuse of the legal system, systematic errors, bloated fees, and chaos in the housing and financial sector. As a society, we have the tools to guard against wrongful foreclosure going forward. These tools include legal reforms and regulatory intervention.”
That was the testimony of Katherine Porter ’01 (PDF), the Robert Braucher Visiting Professor of Law at Harvard Law School, before the Congressional Oversight Panel on October 27. At a hearing on the TARP Foreclosure Mitigation Program, Porter—who specializes in consumer credit, consumer protection regulation, and mortgage servicing—spoke about how the allegations of legal errors in the foreclosure process may impact the housing markets, the soundness of banks, and the financial markets overall.
“The banks and servicing industry designed and implemented the practices that allow inaccurate and unfair foreclosure procedures to flourish, and it is entirely right that they should have to shoulder the cost, in both time and money, of designing and implementing improved procedure,” Porter said. “The key task going forward is to provide transparent measures of the depth of deficient paperwork and to provide reliable monitoring of foreclosure processes.”
Since 2005, Porter has been conducting research on problems with mortgage servicing practices. In one study, she and her co-investigator, Tara Tworney, found more than 50 cases of inappropriate foreclosure or misbehavior by mortgage servicers or their clients, including the imposition and collection of improper fees, a lack of standing to foreclose in judicial foreclosure states and the pursuit of foreclosure without rights in the note and mortgage.
“The key point is that the vast majority of the alleged problems cannot accurately be described as ‘technicalities,’ Porter said. “The flaws in the foreclosure systems go well beyond improper affidavits.”
Porter argued that states or the federal government ought to increase the legal requirements for foreclosures across the board, at least for loans initiated in the last five to ten years, when widespread allegations of paperwork problems and procedural irregularities have existed.
Porter, a law professor at the University of Iowa, is teaching Bankruptcy at HLS this semester. She will teach Consumer Protection and Bankruptcy in the Spring 2011 Term.