Professor Porter Does it Again: Ownership, Agency and Servicing Abuses in Bankruptcy Court

SEE Entire Article: porter While concentrating on Bankruptcy Court all of her points are instructive in all types of litigation.

“From external indicia, the claims process in consumer bankruptcy cases seems like an exemplar of a well-designed legal system that balances the interests of consumers and industry.  The claims rules are unambiguous; all parties typically are represented; the process is uniform; the federal judicial system brings gravitas to the procedures; and specialized actors such as bankruptcy judges and trustees are present to police the system. Yet, despite these reassuring features, the empirical data show that many mortgagees fail to comply with applicable law.  The data establish a widespread, current practice of filing incomplete claims with vaguely identified fees.  This hinders any meaningful or effective scrutiny of whether mortgage companies are only charging the correct amounts to struggling homeowners. The structural incentives are insufficient to uphold bankruptcy’s potential as a home-saving device and to ensure the integrity of the bankruptcy system.

The problems with mortgagees’ calculations are likely to be even worse outside of bankruptcy, where the rules are less clear and the procedural safeguards are fewer. Systematic reform of the mortgage- servicing industry is needed to protect all homeowners—inside and outside of bankruptcy—from overreaching or illegal behavior.  The findings on the unreliability of mortgage servicing are a high-stakes reminder of the challenges of designing a legal system that actually functions to protect

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