Imagine for a moment any one of your low-income clients summoned to court because she defaulted on her mortgage payments. She is terrified that she will have to make a legal argument to save her family’s home or face losing it that very day, especially since she did not know how to file an answer and the court already entered default. But when she appears in court, the default is vacated by consent, and she is given a structured plan to find a way to keep her home. In the courtroom the judge introduces her to a housing counselor and a legal services attorney who are there to help her navigate the process. After in-person mediation, she will end up with a loan modification and will resume making mortgage payments, all before the court case ever gets to the discovery stage. Sounds too good to be true? This is what actually happens for many homeowners in the District of Columbia, thanks to a system implemented by the D.C. Superior Court.
Lenders in Washington, D.C., had historically foreclosed by using an inexpensive and expedient nonjudicial foreclosure process based on the power-of-sale clause in a deed of trust. But, following the adoption of the Saving D.C. Homes from Foreclosure Amendment Act of 2010, most lenders stopped foreclosing. The Act gave homeowners the opportunity to participate in mediation before lenders could foreclose. It further mandated that lenders mediate in good faith by demonstrating their authority to foreclose and offering alternatives to foreclosure whenever feasible. It was one of the most robust laws of its kind in the country. While the nation struggled with an unprecedented surge of foreclosure activity, in Washington, D.C., virtually no foreclosures of residential properties occurred for almost three years.
Lenders initially undertook efforts to repeal or weaken the Act. Although lenders were generally amenable to the idea of discussing loss-mitigation options at mediation, they resisted participating in the statutory mediation program for these reasons: (1) the statutory mediation program mandated offering certain loss-mitigation options to qualified homeowners; (2) homeowners might have been able to challenge a foreclosure that was not completed in strict compliance with the mediation law, even after title to the property had transferred to the new owner, thereby making title insurance for foreclosed properties more difficult to obtain; and (3) the statute permitted the imposition of monetary sanctions if a lender failed to mediate in good faith. But once the lenders realized that the Act’s substantive provisions would remain in place, they began looking for a way to circumvent the Act’s mediation requirements.
This special system for foreclosure cases puts a proper focus on the real-life needs and practical challenges that distressed homeowners face.
Because the mediation requirements of the Act applied only to nonjudicial foreclosures, lenders began filing hundreds of cases seeking judicial foreclosure in D.C. Superior Court. D.C. was suddenly faced with a unique, local foreclosure crisis of sorts, years after foreclosures had peaked in other jurisdictions. Sorting out a multiyear backlog of foreclosures through the court system presented substantial challenges for everyone affected—lenders, homeowners, advocates, and the court. But it also created an unusual opportunity to design a special docket for foreclosure cases with access-to-justice considerations in mind.
Through amicus briefing and stakeholder meetings, the Legal Aid Society of the District of Columbia (Legal Aid) and Legal Counsel for the Elderly at AARP advocated a court process that would protect the rights of economically vulnerable homeowners at risk of losing their homes. Foreclosure proceedings in D.C. Superior Court now serve as an example of a comprehensive approach to access to justice—one that incorporates consideration of case scheduling, docket management, court notices, judicial announcements, and access to legal and social services. Though implemented in the context of foreclosure proceedings, similar measures could be adopted in other courts seeking to improve access to justice for self-represented litigants. This special system for foreclosure cases puts a proper focus on the real-life needs and practical challenges that distressed homeowners face. Here I share the story of how D.C. developed this approach.
Lenders Opting for Litigation to Avoid Statutory Mediation
In 2012 judges in D.C. Superior Court observed that lenders were beginning to file equitable actions requesting foreclosure. The court soon realized that it should prepare for the filing of thousands of residential foreclosure cases over a two-to-three-year period. Because residential foreclosures had historically taken place through a nonjudicial process, some questioned whether the court even had authority to hear the cases and, if so, what measures should be taken to protect the rights of homeowners, particularly those who did not appear or were not represented by counsel.
Faced with deciding a set of cases in which the homeowner defendants did not appear, civil court judge Neal E. Kravitz requested that Legal Aid and Legal Counsel for the Elderly participate as amici curiae. The court sought briefing on the issue of whether judicial foreclosure was legally permissible in D.C. and, if so, what procedural requirements should govern. Amici curiae argued that even though lenders could legally seek redress through the court system, the court should use its equitable power to require early mediation in all residential judicial foreclosure cases to “ensure that lenders comply with their legal obligations to perform a fair and complete loss mitigation analysis” and could not use the court system to circumvent the public policy underlying the 2010 Act’s mediation requirements.
Both lenders and homeowners have strong incentives to engage in loss mitigation.
Amici curiae recognized that court-ordered mediation could not possibly mirror the Act’s mediation program that applied only to power-of-sale foreclosures. For one, without statutory authority, mediators could not require lenders to offer alternatives to foreclosure. For another, court mediators are neutral conciliators, and mandating any particular resolution would be viewed as overstepping the mediator’s neutral role. However, despite these key differences, amici curiae believed that employing court mediation at an early stage could be critical in preventing avoidable foreclosures. Amici curiae also believed that no matter what method a lender used to foreclose, all homeowners should have the opportunity to meet with their lender to exhaust any viable alternatives to foreclosure.
Generally speaking, loss-mitigation options—particularly loan modifications that lower interest rates, extend terms, and forgive or forbear principal to create an affordable monthly payment—can be very effective in preserving homeownership, stabilizing communities, and creating renewed streams of income for lenders. Both lenders and homeowners have strong incentives to engage in loss mitigation. However, the current system of mortgage lending and servicing has failed to make it easy for homeowners to navigate the process and obtain a loan modification on their own. Application packets get lost. Homeowners are repeatedly asked to resubmit, update, or supply additional financial documents, or they are asked for documents that they do not have or cannot obtain. Loan servicer representatives sometimes give confusing or inaccurate information about the application or their reasons for denying the homeowner’s request for a loan modification. Consequently many borrowers who could qualify for a modified mortgage payment become frustrated and give up. Across the country, programs mandating mediation were intended to eliminate some of these pitfalls and keep the loss mitigation on track.
With this backdrop and amicus briefing advocating a special court mediation program, lenders’ counsel and amici curiae convened a series of meetings to discuss a potential judicial system in which the court would oversee the loss mitigation to ensure that the parties consider viable alternatives to foreclosure as a first step in the litigation.
Designing a Court-Sponsored Early Mediation to Prevent Avoidable Foreclosures
Court-sponsored mediation is generally required prior to trial but typically offered too late in the litigation to benefit most homeowners. Very few homeowners defending against foreclosure actions are able to find counsel, and self-represented parties often fail to file a responsive pleading, and this leads to entry of default. They also struggle to make it through the discovery and motions stages of the case. Moreover, court mediation—typically offered after rulings on dispositive motions—would not benefit the vast majority of homeowners who do not dispute defaulting on their mortgage loan. For this type of mediation to work, the timing has to be early in the litigation. Thus both lenders’ counsel and legal services attorneys requested that the court offer mediation at the outset of every foreclosure case and implement measures to facilitate homeowners’ participation in the court process.
Getting Defaulted Defendants Back on Track
Because foreclosure cases are civil matters governed by the rules of civil procedure, the homeowner is required to file a responsive pleading within 20 days after receiving the summons and complaint. Self-represented litigants often miss this deadline because they do not know how to respond to the complaint or do not even realize they are required to do so. In the D.C. Superior Court the clerk’s office had a practice of automatically entering default and canceling the initial court hearing when a defendant failed to file a responsive pleading within the time limit. The case could then proceed to judgment without further notice to or involvement of the defendant. Many defaulted defendants came to court at the date and time set for the initial hearing only to discover that it had been canceled when they failed to file an answer. To engage in the case, the defendant then had to file a written motion to vacate the default and demonstrate good cause for missing the filing deadline. The motion also had to be accompanied by a verified written answer that presented a viable defense to the case. Many homeowners who would be good candidates for a loan modification were unable to navigate this court process.
Yet many dockets with large numbers of self-represented litigants do not condition participation in the court case on the filing of an answer or responsive pleading. In fact, in D.C. neither the Small Claims and Conciliations Court nor the Landlord-Tenant Branch requires the defendant to file an answer. Instead the defendant engages in the case by appearing at the first court date, at which time the court may inquire about the existence of factual disputes and defenses.
Although stakeholders considered advocating an amendment to the rules of civil procedure to eliminate the responsive pleading deadline in foreclosure matters, it was not a viable solution. The process of amending the rules of civil procedure in D.C. Superior Court would have taken too long to be ready for the anticipated and immediate flood of foreclosure cases. In collaboration with court leadership, stakeholders devised a solution that required only minor revisions of the court’s clerical practices on the entry of default and liberal extensions of time to the answer deadline.
Rather than canceling the initial hearing following a homeowner’s default, the court would hold the hearing as scheduled. Also, the court would send the homeowner a notice of default directing the homeowner to come to court. Even though the complaint and summons explain the answer deadline, the complaint packet often exceeds 50 pages, too numerous for many homeowners to be able to extract the most important information. By contrast, the notice of default would be a one-page document prominently displaying the date and time for the hearing and directing the homeowner to appear. Although some stakeholders were skeptical that the revised notice would have an impact, homeowners’ participation in the court process increased significantly following the implementation of this new administrative measure.
Many homeowners who would be good candidates for a loan modification were unable to navigate this court process.
An unanticipated benefit of the new procedure was that it also quickly revealed problems with service of process. By mailing the notice of default to the property address as well as the defendant’s mailing address, the court reached homeowners who had not been personally served. In fact, many homeowners appeared in foreclosure court after having received only the court’s mailed notice of default but having never seen the complaint and summons. Even though defaults are generally set aside by agreement, and homeowners typically consent to service of process at the initial hearing, legal services attorneys used the initial hearing to highlight problems with service anyway. As the court started tracking problems with specific process servers, these resulted: First, lenders’ counsel stopped using those process servers whose affidavits were regularly called into question. Second, legal services attorneys began to have an easier time persuading lenders and the court to set aside entry of default and vacate default judgments based on problems with service of process.
For example, the Lazaro* family did not know its lender had filed a foreclosure case until after entry of default judgment and a foreclosure sale was set. The process server had signed an affidavit of service claiming that he personally served Bianca Lazaro at a property where she had not lived for more than a year. Not only did the process server have the wrong address, but also the alleged service of process happened when Lazaro would have been at work. Most concerning of all, a separate affidavit from the same process server stated that he gave court papers to Lazaro (at the same property where she did not live) on a different date, with the purpose of effectuating substitute service on her daughter. In the “Supplemental Data” section of the affidavit, the process server detailed his personal interactions with Lazaro: she was evasive and refused to cooperate. Contrary to the process server’s bold misrepresentation, Lazaro was in El Salvador that day, as shown by copies of her passport stamps. When counsel became involved and raised the service-of-process problem, the sale was canceled with four days to spare.
These seemingly minor administrative changes had very positive results. Judith Bartnoff, the presiding judge of the civil division who was instrumental in effectuating these changes, reported that nearly half of the homeowners who defaulted later appeared at the initial hearing. Most defaults are now vacated by consent of the parties at the initial conference. In any docket where defaults or self-represented litigants are common, courts should be encouraged to review their practices to ensure that court notices are mailed to defendants, that notices clearly and prominently display essential information such as upcoming court dates, and that defaulted defendants are given the opportunity to participate in the litigation even when they initially fail to file a responsive pleading. Legal services providers should be encouraged to highlight problems with service of process in open court, even when opposing counsel is amenable to setting aside a default or vacating judgment.
Extending the Answer Deadline
In cases where a default is vacated at the initial hearing, the court typically sets an extended answer deadline far out into the future to allow the homeowner to focus on early mediation efforts before having to articulate legal defenses and counterclaims in the foreclosure action. Extending the answer deadline is important: First, the legal services community does not have sufficient resources to assist all homeowners in filing responsive pleadings. Also, any resources that legal services providers commit to assisting homeowners in drafting and filing answers would necessarily reduce the resources otherwise available for assistance in loss mitigation and litigating cases with potential systemic impact. Second, by delaying the answer deadline, homeowners can focus their limited resources on exploring options other than litigation for keeping or releasing their home. Delaying the answer deadline also benefits the court by reducing the number of motions for entry of judgment on the pleadings. Because cases often are resolved during the early mediation process, many homeowners never have to file an answer.
Tailoring the Mediation Process
Applying for a loan modification or other alternatives to foreclosure generally requires the homeowner to complete an application accompanied by supporting financial documentation. Upon receiving a complete application, the lender reviews the packet to determine whether the homeowner qualifies for any loss-mitigation options. By collaborating with the court to design a mediation program to facilitate and support the exchange of information, stakeholders hoped to reengage homeowners in the loss-mitigation application process and hold loan servicers accountable. Defendant homeowners who want to keep their home or explore other loss-mitigation options, such as a short sale or deed in lieu, are put on a scheduling track leading to early mediation. The scheduling order sets a date for mediation and deadlines leading up to and following mediation to make sure the parties have exchanged the necessary documents and are ready for mediation and for the court to determine appropriate next steps after mediation is completed.
Free mediation services are available to the parties through the court’s dispute-resolution division. Court mediators receive initial and ongoing training on the loss-mitigation application and approval process, the regulatory framework governing the federal mortgage assistance programs, issues that should be considered by homeowners prior to settlement, options for releasing property, and the availability of community resources to assist distressed homeowners. Although many foreclosure cases are not settled during the session with the mediator, that session is often the only opportunity for the homeowner, attorneys, housing counselors, and servicer to meet as a group to discuss problems with the loss-mitigation application. Mediators assist in resolving disputes or misunderstandings about requested financial documentation and help identify flaws in the servicer’s loss-mitigation analysis; these actions lay the foundation for resolution at a later date. When a borrower does not qualify for a loan modification, mediators assist in negotiating terms for releasing the property through deed transfers or sale.
Consolidating Cases onto a Single Docket
Residential foreclosure cases in D.C. used to be randomly assigned to judges throughout the civil division with resulting inefficiencies for the court and lenders’ counsel. With foreclosure cases dispersed throughout the courthouse, legal services providers could not effectively deploy resources to assist the high number of eligible low-income homeowners. By consolidating residential foreclosure cases on one docket and scheduling hearings on only one day each week, the court eliminated these inefficiencies and laid the foundation for measures designed to improve access to justice for self-represented parties.
For example, judges now give introductory remarks specific to judicial foreclosure cases. The morning announcement educates and engages litigants in the process by acknowledging the public policy implications behind encouraging loan modifications and reiterating that lenders and homeowners have a shared interest in avoiding foreclosure whenever feasible. The announcement acknowledges some of the problems that litigants may have experienced with the loss-mitigation application and explains how the court process was designed to help facilitate agreements to avoid foreclosure. The judge explains what the parties can expect during the initial hearing and throughout the proceedings. Because this information can be overwhelming for defendants facing the potential loss of their home, the court describes available services to assist homeowners. By introducing homeowners to legal services attorneys and housing counselors who are present in the courtroom, the court increases the likelihood that the most vulnerable homeowners will receive immediate assistance.
Placing Legal Services Attorneys and Housing Counselors in the Courtroom
Legal Aid operates various court-based projects to give low-income litigants access to same-day and extended representation at the courthouse. Legal Aid’s first court-based project began in 2007 to offer temporary representation to tenants defending against eviction cases. Legal Aid and its partners placed attorneys at the courthouse to conduct initial client interviews, execute retainers, and give immediate services to tenants facing eviction. Because the court-based service delivery model was relatively new at the time, Legal Aid and its partners worked cooperatively with the court to establish the first limited practice rule in D.C. Superior Court. Since then, project attorneys have been delivering much-needed same-day legal services to thousands of individuals and families at risk of being evicted from their homes. Legal Aid and its partners subsequently advocated expanding the limited practice rule, and the court now permits attorneys to enter temporary, limited-scope appearances in most types of civil cases.
With all foreclosure cases consolidated onto one docket and initial hearings scheduled only one day a week, Legal Aid and Legal Counsel for the Elderly were able to allocate attorneys to staff a court-based legal services project for judicial foreclosure cases. Project attorneys
- give individualized explanations of the court’s early mediation scheduling order and answer litigants’ questions about the process;
- counsel homeowners on their legal rights;
- distribute self-help materials, including litigation forms and informational pamphlets explaining loss-mitigation options;
- offer temporary representation to homeowners who may have difficulty articulating their position or need a legal advocate to advance arguments or preserve issues;
- provide extended representation to eligible homeowners seeking to retain their home;
- investigate and sometimes assist in cases where incapacitated or elderly homeowners have failed to appear;
- observe and identify opportunities for further systemic advocacy on behalf of low-income homeowners; and
- connect homeowners with housing counselors and other social service organizations.
Because housing counselors certified by the U.S. Department of Housing and Urban Development are also in the foreclosure courtroom, legal services attorneys can refer clients or over-income homeowners for assistance. Housing counselors offer free, individualized counseling and assistance to homeowners navigating the loss-mitigation application. In some cases, housing counselors are even able to give referrals and funding to litigants who need, but are unable to afford, private attorneys.
The importance of having these services at the courthouse cannot be overstated. Homeowners at risk of foreclosure are often juggling multiple court appearances with full-time employment, child-care needs, significant financial hardships, and the psychological stressors that come with the potential loss of housing. By offering immediate access to services at the initial court hearing, we can eliminate some of the barriers that prevent the most vulnerable homeowners from ever obtaining the legal information, advice, and representation they need to prevent an avoidable foreclosure.
As an example of how the process works, consider the case of Ms. Chapman.* She had been living in her home for 17 years. The property also housed three generations of her family. When Legal Aid met Chapman in court, she had already filed a pro se answer to the foreclosure complaint, but because it did not raise any legal defenses, the lender filed a motion for judgment on the pleadings to ask that the court grant an order of foreclosure without the need for any further litigation. Things turned around dramatically after a lawyer got involved for Chapman. The lender withdrew its motion for judgment on the pleadings, and Chapman was given the chance to file an amended answer and go to early mediation. Through that process, Chapman applied for and was granted a loan modification that brought her loan to a current status and allowed her to make affordable monthly payments going forward. The foreclosure case was dismissed—and Chapman, her mother, and her children are now stable in their longtime family home.
In D.C. this innovative approach to judicial foreclosure, which combined a restructuring of the court process with court-based legal and community services, has helped countless families remain in their homes. Lenders have benefited from resumed streams of income from mortgage payments. The community as a whole has benefited from the prevention of unnecessary foreclosures. Having seen firsthand the significant impact that minor procedural changes have in protecting the rights of self-represented parties and in facilitating their participation in the litigation and resolution of their case, the court has begun implementing similar changes across other dockets. The lessons learned in D.C.’s foreclosure court can and should be used to help shape court processes and the provision of legal services in other jurisdictions.
* All clients’ names have been changed to protect client privacy.