A Standing Question: Mortgages, Assignment and Foreclosure

Banks are neither private attorneys general nor bounty hunters, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other bank\u27s deed of trust. This Article examines the judicial treatment of mortgage assignments across various jurisdictions in the foreclosure context. Although some courts do permit debtors to challenge suspicious or problematic assignments, most have ignored such problems and denied standing to debtors attempting to assert assignment-based defenses. This is particularly surprising given the widespread and well-documented problems with foreclosure robo-litigation, including backdated documents, fraudulent notarizations, and unauthorized signatures. Despite the abuse of process by foreclosing entities, courts have permitted foreclosures to continue unabated and, in some instances, have even precluded the possibility of discovery to debtors seeking to ensure that title and assignments are legally valid. Judicial ambivalence about formal compliance by mortgage assignors and assignees in the foreclosure context is somewhat ironic given most courts\u27 routine enforcement of instruments against debtors who do not formally comply with all contractual terms. Current adjudicative approaches to mortgage assignment are seemingly disconnected from the devastating reality of the home mortgage crisis and its causes. Moreover, there are several rationales that would support a more robust enforcement of technical compliance with assignment procedures, including the need for procedural equity, title certainty, and public records integrity. Thus, as evidence exists that banks are still making many of the same problematic mistakes regarding transfer documentation, courts can perform an essential monitoring role as an important spur towards reform. Although it would not address all of the underlying causes of the housing crisis, an adjudicative approach that liberally permits challenges to mortgage assignments would encourage lenders and servicers to be more circumspect in their foreclosure processes

The Moral Hazard of Contract Drafting

This Article identifies and examines the principal-agent problem as it arises in the context of contract preparation. The economic agency relationship, as it may be understood to exist for contract drafting, provides a superior framework for understanding and reforming the inability of the non-drafting party (the principal) to control the drafting party (the agent). As an economic agent, the drafting party faces a moral hazard when preparing the contract because of the differing interests of the parties as well as the information and control asymmetries that exists. For example, the use of standard form contracts in consumer transactions is an example of the drafting party being motivated and able to act in the drafting party’s favor without detection or resistance by the non-drafting party. To date, contract law reforms typically have focused on the non-drafting party’s ability to monitor and attempted to alleviate information and control asymmetries, with suboptimal results. Economic theory, however, not only helps explain these failures but also suggests superior reforms. Reforms should be focused on realigning the interests of the two parties instead of remedying the problems that emanate from such misalignment. More specifically, reforms should incentivize drafting parties to devote resources to determining how to make effective disclosure of contract terms and penalize drafting parties when they do not

Contract Review: Cognitive Bias, Moral Hazard, and Situational Pressure

This Article explores the contract drafting and review process of attorneys from a cognitive and social science perspective. Based on an understanding of the behavioral tendencies of individual attorneys as impacted by cognitive bias, moral hazard, and situational pressure, the drafting attorney may be able to secure particular transactional advantages for her client. For example, the anchoring effect, which suggests that individuals are affected by the presence by an initial value position, may explain why drafters should and do include extreme positions in their initial draft. Similarly, time pressure may affect an attorney\u27s review of a contract, which a drafting attorney can anticipate and exploit to her advantage by increasing contract length and complexity. The drafting attorney can also seek to take advantage of particular moral hazards that the reviewing attorney faces when representing clients, such as when the reviewing attorney is compensated on a per-transaction basis or would like to appease the client and avoid disrupting a transaction. Understanding the cognitive processes and situational influences helps explain or predict particular patterns of contracting behavior. These factors suggest significant limitations in the attorney as an effective tool in checking oppor unistic behavior, both prior to and after contract formation, and undermine a positive model of the transactional attorney as a value-adding transaction cost engineer

Using Transactional Practice Competitions to Introduce Students to Key Deal-Making Skills

Law school moot court competitions are everywhere. That is a bit of an exaggeration, to be sure, but not by much. At last count, students with an interest in litigation had more than 60 interschool appellate advocacy competitions to choose from, ranging in topics from admiralty to space law to veterans law. Toss in trial advocacy competitions, and the number of opportunities to hone litigation skills increases significantly. And seemingly every law school has its own intraschool litigation competitions, ranging from part of a 1L legal writing program to school-wide appellate advocacy competitions whose final rounds attract prominent judges or litigators and which are a résumé highlight for the winning students