Relating 'lessons learned' from foreclosure crisis


- Photo by Robert Chase

By Paul Janczewski
Legal News

Can officials in the United Kingdom learn anything from America’s mortgage crisis and foreclosure experience as their country braces for one, albeit on an anticipated smaller scale?

A group of mortgage lenders, attorneys and others in England believe they can. And they recently invited Farmington Hills attorney Jeffrey Weisserman to address just that at conference sponsored by their Council of Mortgage Lenders.

In February, Weisserman presented “Lessons to be Learned from the U.S. Foreclosure Experience” to that group in Manchester, England.

“My role at the conference was to show them where we were and what we did, and some things they may be able to use,” Weisserman said. “My idea was, if somebody had told us, in advance, some of the alternatives we tried to deal with the rising tide of foreclosures, maybe we could have found earlier the ones that work and the ones that didn’t work.”

Weisserman, 48, an attorney with Trott & Trott, is the resident expert on mortgage matters and foreclosures. He graduated from Michigan State University in 1984 with a teaching certificate in history and English, and entertained a career as a teacher before deciding on law for the “intellectual challenge” it gave him.

After graduating from Wayne State University Law School in 1987, he joined a Detroit firm, specializing in representing mortgage lenders.

In 2003, Weisserman joined Trott & Trott and continued in that field, representing mortgage companies, banks, and mortgage services.

“I fell into it gradually over the years,” he said.

Weisserman is a sought-after speaker on those issues and on trends, default servicing and related matters, and is active in legislative affairs relating to the mortgage industry.

He has written articles on the industry, given seminars and spoken at national conferences, as well as speaking to clients and their employees on the foreclosure process.

“I enjoy doing it,” he said. “I think it’s useful to have people note the right way to do things, and it sort of scratches that educational itch I’ve always had.”

It was only natural for him to take his act across the pond and see firsthand what the foreclosure climate had in store for England, and default servicing in other countries.

So he attended the conference last year as an interested observer, and said it occurred to him that “they were systemically a couple of years behind the United States in terms of the bubble, the foreclosure experience.”

After having discussions with officials about his thoughts, he was invited back to share his wisdom about what we’ve learned here. England’s Council of Mortgage Lenders is their version of America’s Mortgage Bankers Association. Weisserman said theories abound on what has caused the surge in mortgage foreclosures across the U.S., “but there’s no question that based on unemployment and other economic factors, we have had unprecedented amounts of foreclosures.”

And he said a number of approaches have been tried to resolve it and increase home retention.

“Law firms, such as Trott & Trott, have definitely increased the amount of loss mitigation/home retention programs they are working on, and it’s the fastest growing part of our business,“ Weisserman said. “It may surprise a lot of the public to learn that law firms like us help save more homes than any other entity in the country.”
Armed with information on home retention efforts that actually work, Weisserman took his knowledge, a little bit of humor, and a Power Point demonstration to the conference.

“I focused on loss mitigation efforts and home retention efforts that I believe work,” he said.

Weisserman told the group about programs used in different states and in different forms, but all of which are designed to encourage borrowers and lenders to sit down together and determine whether or not there was some deal that could be made that would allow the borrower to stay in his home.

Generically, those are called mediation programs, although the program used in Michigan since 2009 is a misnomer because no mediator is involved.

But Weisserman said the program gives both the borrower and the lender an incentive to talk and see if something can be done.

Simply put, it works like this: after receiving a notice that your home is in foreclosure, you get an opportunity to sit down with the lender and determine if something can be done to save the home.

If you agree, a 90-day stay of foreclosure is issued, and that time is used for the parties to work on a number of possible solutions to the problem, whether it be loan modification, or some other program that allows you to keep the home.

“My pitch in England was, as this is coming to you, realize that what is working more than anything else is this, encouraging a borrower and lender to sit down and see what can be done,” Weisserman said. “It sounds simple, but it was really a paradigm shift a couple of years ago.”

In Weisserman’s view, “everyone involved had something to do with creating the conditions that made it ripe for a large number of foreclosures, including the people who made the loans, the governmental response to the issue, those who service loans, and the borrower himself.”

Weisserman said unemployment, rather than the type of loan one has, has been the driving force of the large amount of foreclosures.

And the decline in property values is also a function of it because you can no longer re-finance out of it because you may owe more than the home is worth.
He said lenders lose money every day that a loan is not performing and on every home in foreclosure.

The lender may get the home back after foreclosure, but its likely dropped in value.

“So both sides should have an incentive to determine if there is something that can be reasonably done to save that home,” he said.

The United Kingdom has fewer homes expected to be in foreclosure this year than Michigan does, “but they are starting to gear up,” Weisserman said.

He said officials there report that homes are over-valued and are starting to see more and more homes in default. And the country’s loss mitigation efforts have been limited, he said.

Weisserman said a few tactics have been tried, such as not collecting for a short period of time and hoping that would work, or having a person just pay the interest for a time and hoping the homeowner finds a way out of the problem that caused the default.

He believes the United Kingdom is 18 months to two years behind America with the foreclosure problem, and has not yet bottomed out, but has not and will not face the huge problems we have here.

“They don’t have the widespread economic issues like we had in our manufacturing states, such as Michigan, Ohio and Indiana,” he said.

And while they do have economic issues, they do not have the high unemployment rates of 15 percent like Michigan.

“And hopefully, they won’t,” he added.

As to where the U.S. stands now, Weisserman said, “That’s a question of interpretation.”

“We are working our way through it. Unemployment is still high, although it is better. And where we are varies from state to state. In Michigan we still have unemployment issues to deal with before we see the end of it, in my view,” Weisserman said.

Weisserman is reluctant to give economic projections for the U.S. and the United Kingdom.

But he is comfortable with them having a plan in place should they get hit with a huge number of foreclosures “rather than coming up with it on the fly like we did.

They can learn from our experiences.”

“Most of our legislative changes, these mediation programs, came about reactively as a result of the large number of foreclosures and the large number of vacant homes. Thinking about plans like that before those large numbers hit is a better idea,” Weisserman said.

“A reasoned pro-active response as a society makes more sense,” Weisserman said. “We couldn’t see it coming, but maybe they have the ability to see it coming and be prepared for it.”

Weisserman said the feedback he received after the conference was positive.

“I was very honored to receive the invitation,” he said. “It was a learning experience for me, and at the same time, I hope I was able to give them some food for thought, depending on what direction their economy and real estate finance system goes that they can use.”

He has not decided if he will return to the conference next year. “A year from now the U.S. experience will be a year further down the road, and there may be additional lessons to be learned,” Weisserman said.

But he gave his employers at Trott & Trott credit for allowing him to go this year and being supportive of his efforts.

Weisserman said he, and the law firm “only do things the right way.” For both, home retention, loss mitigation, and the importance of keeping people in their homes is a win-win situation.

“I think we are keeping more people in their homes, based on the volume we do and the results we get back from investors and clients, with loan modifications or whatever programs are necessary, than just about anyone in the country,” Weisserman said.

“We’re saving homes.”