As a result of the high volume of foreclosure litigation in the wake of the Great Recession, scholars have explored several outgrowths of the foreclosure crisis, developing a burgeoning body of research. Scholars and commentators have authored studies about a wide variety of foreclosure-related topics, ranging from the disparate racial effects of the housing crisis to the many legislative and court-instituted policies enacted to ameliorate the harsh reality faced by financially distressed homeowners, all the way through books examining the aftermath of the crisis and lessons learned from the entire experience.
Our previous contributions to this evolving body of research primarily focused on idiosyncratic and troubling doctrinal developments in foreclosure litigation. This Article provides another data point, consistent with our other findings—namely, that in response to the record levels of foreclosure cases, judges and legislatures largely chose symbolic palliative actions to give an appearance of helping distressed homeowners, while at the same time systematically narrowing borrower defenses. In previous research, we offered support for these two points in several different contexts:
- Legislative and judicial efforts at ameliorating externalities of the foreclosure crisis;
- Disciplinary actions or investigations regarding a host of questionable or unethical foreclosure attorney conduct;
- Judicial treatment of borrower defenses to fraudulent or problematic assignments of mortgage or other title transfer documentation commonly used in foreclosure litigation;
- Application of statutes of limitation and the doctrine of res judicata to lender claims in foreclosure cases; and
- Borrower challenges to Mortgage Electronic Registration Systems, Inc. and its fundamental alteration of traditional American recording practices.
Our previous research articulated a new understanding of the reasoning behind many of the attacks upon, or narrowing of, borrower defenses and the lack of strict accountability for questionable bank litigation practices. In sum, it appears that state actors systemically frame the foreclosure context differently from other types of civil litigation. The consequence of this framing is that judges are emboldened to modify or dispense with traditional civil practice procedures or doctrines, typically to the detriment of financially distressed homeowners facing foreclosing entities with significantly more resources.
This Article extends this analysis and theory of systemic framing to yet another area of longstanding jurisprudence facing attack and overhaul in the context of distressed homeowner litigation—namely, the applicability and availability of attorneys’ fees awards to the successful homeowner-litigant. Most, if not all, mortgage contracts specifically allow for the foreclosing entity to recover their attorneys’ fees in the event of default and foreclosure. Many state statutes contain automatic reciprocity provisions for such one-sided attorneys’ fees provisions regardless of the type of contract. Yet, perhaps unsurprisingly in the wake of our prior research, traditional application of such reciprocity has begun to deteriorate and erode in the face of judicial skepticism towards awarding homeowners’ attorneys’ fees. Accordingly, this Article continues the same narrative, in another context, of state actors viewing and treating distressed homeowners differently than other civil litigants, to the detriment of those homeowners. Lenders are allowed to plead for recovery under the mortgage, but in those rare instances when they lose for standing or for title reasons, they may then seek to avoid paying attorneys’ fees under the fee recovery statute because of that lack of standing or title. In other words, courts permit lenders to “lie yesterday” about being the proper party to enforce the contract and believe that they are “telling the truth” today about not being a party to the contract, which otherwise would require paying the homeowners’ attorneys’ fees.