A few days ago I wrote that a cause of foreclosure-gate was the law industry’s failure to fully adapt to mass production, at least partly because of current ethics rules.
But lawyers are, of course, fully capable of litigating the mistakes that result from this business model. Yesterday’s WSJ examines “the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market.”
Some will think of these lawyers as heroes for keeping their clients in their homes, while others will think of them as money-grubbing transaction-cost generators. My point here is only that the structure of the law industry skews it to litigating problems rather than creating solutions.
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In the court jurisdictions have busy judges been signing summary judgments just to clear dockets? Evidence and accuracy be damned?
I think this was happening for decades, it is just the volume that is different now.
The “foreclosure mill” law firms appear to be modeled after the “collection mill” law firms. The collection firms use law licenses to sidestep laws regulating collection agencies, buy up old files from banks, have staffers fire out thousands of junk suits often backed by robo-signed affidavits, and hope confused or strapped consumers do not response creating default judgments.
“. . . the structure of the law industry skews it to litigating problems rather than creating solutions.”
Amen to that, Larry. This is why I am so concerned that corporate governance in the U.S. (and only in the U.S.) is becoming the exclusive province of lawyers. Instead of working out flexible, judgment-based solutions of maximum utility to investors, the focus is increasingly upon tightening up compliance of strictly-defined rules, and fighting like hell against any extension or modification of these. Legal advice is often needed in this area, of course, but the proper guidelines should emanate from an investor-oriented, risk-optimizing mentality, not one of seeing everything through the matrix of positive law.