Lawyers and Lenders

This story from BusinessWeek is pretty hilarious - a new growth industry created by the recent housing boom ... for lawyers. Jobs created as a result of borrowers and lenders defending themselves or filing lawsuits against each other would land in the Professional and Business Services category of the Bureau of Labor Statistics non farm payrolls report.

More growth in the service sector, it would appear.

Bankruptcy Boot Camp
How one man is training an army of lawyers to fight predatory lenders

Every week at least two homeowners walk into the office of Boston bankruptcy attorney David G. Baker looking to get out from under their mortgage debt. That's an alarming increase for a sole practitioner like himself. "I've never before had clients who walk in and say: `I just can't afford my house anymore,'" he says. "It's a little scary."

Baker needed to bone up on the intricacies of new mortgage products. So he signed up for Bankruptcy Boot Camp, the brainchild of O. Max Gardner III, the go-to guy for consumer bankruptcy attorneys across the country. The idea is to get lawyers familiar with the latest strains of mortgage abuse, then to educate them about federal laws that protect their clients. Baker now knows how to renegotiate mortgages and avoid a foreclosure. "People can ask lenders to restructure their loan," he says. "But that's something they keep from you because it's not in their best interest."
...
It's inevitable that some homeowners get hurt in a downturn, especially those who have to sell unexpectedly and can't ride out the market. But experts say the pain will be broader and deeper this time around. In the past few years, millions of Americans bought homes they couldn't afford, lured by exotic mortgages that advertised no money down and low monthly payments--for a limited time only. As housing prices cratered and interest rates rose, borrowers got squeezed. The result: One in five subprime loans issued in 2005 and 2006 will fail, according to the Center for Responsible Lending.

ON THE OFFENSIVE
Gardner and his growing cadre of lawyers say the lending system is largely to blame. While some people carelessly got in over their heads, lenders bear responsibility for extending too much credit to unsophisticated borrowers. Worse, abusive players fail to credit mortgage payments, then charge huge late fees. Before the Bankruptcy Reform Act of 2005, most attorneys just filed the necessary paperwork to work out the inevitable Chapter 13 plans. But Gardner's model advocates scouring for violations that occur during the lending process and while the borrower is in bankruptcy protection. "My goal is to train an army of attorneys to take the fight right to the creditors and their Wall Street aiders and abettors," says Gardner. "They wanted reform, and we're going to give it to them."

There is a newfound respect for BusinessWeek around here these days - they've managed to overhaul their website so the ads don't annoy readers too much and the html doesn't frustrate Firefox browsers.

In the Business Outlook section, James C. Cooper is still waaaay too optimistic about all things economic - he must be an economist (yep, that was a good guess - James C. Cooper, BusinessWeek (.pdf)) - but the magazine's coverage of the nation's housing market has been head-and-shoulders above most of the rest of the mainstream media for both insight and objectivity.

Around here, BusinessWeek still sits waiting for The Economist to be thumbed through, but it is making progress.