For Foreclosure Prevention Litigation, Procedural Steps Toward Substance?

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In his recent article, "New Formalism in the Aftermath of the Housing Crisis" (PDF), Fordham Law professor Nestor Davidson claims that recent judicial victories that have helped borrowers avoid foreclosure may present a "[problematic] shift too far toward procedural reform over structural efforts to respond to the legacy of the housing crisis." See 93 B.U. L. Rev. 389 (2013). While Professor Davidson raises some important concerns that "formalist" arguments that render foreclosures void- such as banks sending improper notices of default, failing to mention the role of Mortgage Electronic Registration Systems (MERS) as servicer, and failing to serve adequate process- will not create any incentive for lenders to change the substance of their lending practices and make meaningful changes, formalist arguments to void foreclosures do not always yield formalist, procedural results. In Massachusetts, this blog's home base, strong consumer protection laws and a cohort of top-notch legal aid providers have notched some impressive formalist victories that have translated into more opportunities for borrowers facing foreclosure to remain in their homes. See e.g.,  Eaton v. FNMA, 462 Mass. 569 (2012); U.S. Bank Nat'l Ass'n v. Ibanez, 941 N.E.2d 40 (Mass. 2011). In the wake of these landmark foreclosure decisions, laws have been passed (or, in some cases, seriously enforced for the first time) that require lenders to notify borrowers of their loan modification rights and set up face-to-face consultations with borrowers and, in a handful of communities (now including Lynn, MA!) have passed mandatory foreclosure meditation ordinances. It is true that banks have deeper litigation pockets and will begin to find ways to dodge procedural or formalist foreclosure arguments. However, the remarkable judgments won by those victimized by unscrupulous lending practices through these procedural channels have sparked foreclosure prevention with impact far beyond the letter of the law.