FEBRUARY 2009 VOL. 1, ISSUE 2

Y~ung Lawyers in Position to AssistCpnsumers Facing ForeclosureBy Sue Berkowitz

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T~e term "crisis" is overused, but today'sep~demic of housing foreclosures repre-serts an urgent situation the effect ofwhich by all impressions will be felt foryears to come. As the cause, effect andcure debate rages on, one fact is univer-sally accepted as truth: problematic prac-tices in the subprime lending andborrowing market have contributed sub-stantially to the damage.

Subprime lending rose to prominence'with breathtaking swiftness, both nation-ally and in South Carolina. According towww.responsiblelending.org, nationwide,

ALSO IN THIS ISSUE

Bar Bits 3

Congrats ···4

Initial Leadership Academy Closes 4

Committee Updates 5

subprime loan originations grew fromless than five percent of the total mort-gage market in 1998 to almost 25 percentin 2006. The South Carolina rate "wasstillhigher: 26 percent of all home loans orig-inated in 2005-06were of the subprimevariety. Media reports suggest that this re-markable growth is profit-driven. Drivenby investor demand for easy initial termson the consumer side, and by the ease ofselling packages of subprime loans to fi-nancial institutions on the back end, sub-prime lending and borrowingskyrocketed. Perhaps surprisingly, manyconsumers of subprime loans would havequalified for prime loans: the Wall StreetJournal reported that of the subprimeloans originated in 2005 that were pack-aged into securities and sold to investors,fully 55 percent "went to people withcredit scores high enough to often qualifyfor conventional [i.e., prime] loans withfar better terms." That number rose to 61percent by the end of 2006. Rick Brooks &Ruth Simon, Subprime Debacle Traps EvenVery Credit- Worthy As Housing Boomed, In-dustry Pushed Loans To a Broader Market,The Wall Street Journal at Al (Dec. 3,2007). Whether the blame for this swash-buckling practice lies primarily withlenders or borrowers is an open matter.That the resulting problems are affectingSouth Carolina is undeniable.

Reflections on Professionalism:A Student Perspective 8

The Nuts and Bolts of the IllegalImmigration Reform Act. 12

From the Editor 15

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A REPORT TO MEMBERS OFTHE SOUTH CAROLINA BARYOUNG LAWYERS DIVISION

South Carolina YoungLawyer ispublished semi..annually by the YoungLawyersDivision of the South CarolinaBar, 950 ThyloT St., P.O. Box 608, Colum-bia, SC 29202-0608. wwwscbar.org.copyright" 2009South Carolina Bar.The opinions expressed arc those of theauthors and do not represent the opin-ions or policies of the YoungLawyersDivision or the South Carolina Bar.Unauthorized reproduction or use of the.mater+als contained herein is prohibited.

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Based upon projections from theCenter for Responsible Lending(CRL), South Carolina is feeling acrippling impact from this crisis inthe subprime market. It is estimatedthat one in six subprime loans inSouth Carolina will end in foreclo-sure. This projection is higher thanearlier data released by CRLbecauseit reflects newer estimates of sub-prime defaults as reported by MerrillLynch, Moody's Economy.com andthe Mortgage Bankers Association.Property value changes do not in-clude locations outside of metropoli-tan statistical areas. Thus, forsubprime loans originated in S.C.from 1998 to 2006, the state will ex-perience nearly 28,000 foreclosures.This increase in foreclosure thenleads to huge declines in our prop-erty values around the state. Thetotal effect:

• 179,300 homes located near a sub-prime foreclosure will suffer pricedeclines.

• $477 million will be lost in homevalues, and therefore in the taxbase.

• An average decline of $2,660 foreach home affected.

CRLalso has estimated the county-by-county cost ofthe expected waveof foreclosures for all counties inmetropolitan areas in South Car-olina. In Richland County CRLesti-mates that 1,028 homes will be lost toforeclosure of 2005-06 subprimeloans. And, 32,205 nearby homes inRichland County will lose an averageof $1,251 in home value each, result-ing in a total loss of equity and taxbase of more than $40 million. Thesenumbers bring into stark relief SouthCarolinians' broad-based interest instanching the flow of foreclosures inour communities.

As attorneys we are in a positionto provide specific assistance. Lessthan two percent of South Carolinaconsumers served "withforeclosurepapers even serve a response. In mostcases where there is no Viable formaldefense, there are opportunities to as-sist the homeowner in avoiding los-ing his or her home.

One such option is provided bythe landmark predatory lending leg-

islation the General Assembly passedin January 1, 2004, which addressesall mortgage loans made for personalor household use. The legislation in-cludes limitations on lenders andmortgage brokers, stringent disclo-sure requirements, and specific reme-dies and penalties resulting from aviolation of the Act. As an additionaland particularly persuasive sword, at-torney's fees can be awarded if theconsumer prevails in his or her causeof action. Even if not comfortable tak-ing these cases to court, attorneyshave the skills to negotiate with mort-gage lenders and servicers to securecommon sense work out agreements.

The federal legislative and regu-latory apparatuses have become in-volved as well. Details are scant, butit is expected that additional protec-tions and options will be providedfor homeowners and their represen-tatives.

For attorneys interested in assist-ing consumers who are facing fore-closure, there is assistance from S.C.Appleseed Legal Justice Center. If anattorney is willing to undertake a probono foreclosure, SCALJCwill pro-vide draft pleadings, a comprehensivelegal manual to help with under-standing the applicable law, and sup-port staff to assist with the process.

Sue Berkowitz is the director of S. C.Appleseed Legal Justice Center inColumbia.

To submit items for the nextissue of the s.c. YoungLawyer, please contact:

Benjamin A. Traywick, EditorYoung Clement Rivers, LLP

P.O. Box 993Charleston, SC 29402

(843) 720-5459Fax: (843) 579-1303btraywick@ycrlaw.com

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