THOMAS BENNET: Attorneys get testy

While foreclosures skyrocket, so do the opportunities for problems in the foreclosure process.

The legal to-do list required for every foreclosed piece of property is full of potential pitfalls and points of contention between the attorneys doing the foreclosing and the attorneys working on behalf of title insurers. Disagreements or missteps in the process, they say, are delaying resales of foreclosed homes and leaving some properties vacant for weeks or months longer than necessary.

Attorneys like Amanda Zuretti, title counsel in the Wellesley office of Connecticut-based CATIC, say strain is showing in the foreclosure process, an exacting legal proceeding even under ideal circumstances. She’s seen a spike in errors such as mistakes where and how foreclosure announcements are made. Ward Graham, New England Division counsel for Boston’s Stewart Title Guaranty Co., says it’s common to see mistakes in documentation, such as powers of attorney that don’t adequately spell out the details of the work the attorney is permitted to perform.

Such missing pieces leave title counsel unwilling to give their blessing on title insurance until the errors are corrected – and that sometimes means an outright do-over of the sale closing or auction, Zuretti said.

“It’s a mess out there, and nobody really knows about it yet,” she said, as the problem hasn’t gotten a lot of attention amid the economic news of the past few months.

Occasionally, homebuyers who purchased a foreclosed property at auction might have to give up their expected home because some aspect of the foreclosure wasn’t conducted properly, she said.

She recalled a recent case where the buyer had already put a deposit down on a house purchased at auction. But because the foreclosure process was not followed correctly and title insurance could not be obtained, the house will likely have to go back on the auction block, and the buyer might not get it the next time around.

Graham and other title insurance attorneys point to the extreme increase in foreclosures as the key problem, combined with lenders’ desire for a speedy turnaround on foreclosed properties.

“There are, frankly, simply many more mistakes being made than ever before,” Graham said “It certainly holds up the process in terms of the lender being able to sell.”

And at the very least, it’s sharpened tensions between title counsel and closing attorneys, bringing up points of contention about what constitutes a sound foreclosure.

System Strain

Thomas Bennett, partner with Boston law firm Barron & Stadfield, agreed that the volume of foreclosures has lead to more sloppiness on the part of some foreclosing attorneys, but he counters that title insurers’ attorneys now often slow the process further.

The soundness of title is not a black-and-white matter, he said: Personal judgment often plays a big part.

It’s a tense, work-heavy time, and that’s made counsel for title insurers overly vigilant, he said. In their skittishness over having a correct foreclosure process, they’re “nit-picking” about some issues.

“It just makes it harder to close,” he said, and brings out some of the testiness between either set of attorneys. “It makes everybody a little more negative.”

The flubs might also come faster because more inexperienced lawyers are diving into foreclosure work for the first time, said Zuretti, who noted that as foreclosures increase, firms are taking on more attorneys who are new to the process to handle the increased volume.

Much of the area’s foreclosure work is done by a handful of experienced firms, but some have been looking for more attorneys recently – for example, Harmon Law Offices in Newton, a major foreclosure firm that declined to comment on any company expansions, has a number of job listings for attorneys on Monster.com.

“The legal industry has seen an increase in demand across the board,” said Jason Vasquez, spokesman for the Washington, D.C.-based Mortgage Bankers Association. As for the lending institutions, any foreclosure means they’ve already lost a significant amount of money: Extra delays in selling off foreclosed properties only add to such losses, although it’s impossible to quantify exactly how much these legal delays might cost lenders.

John A. Doonan of Doonan, Graves & Longoria LLP in Beverly, said he hasn’t seen any increase in missteps during the foreclosure process, but admits that attorneys have had to work at a brisk pace to keep up with demand.

“The current situation has put a strain on the entire system” he said.