TAMPA — At the start of class, April Charney makes one thing clear.
"This is very dense, complicated work,'' she warns. "If you don't get it, raise your hand and ask questions because the chances are others don't get it either.''
Charney pauses for emphasis. Casually dressed, dark hair streaming down her back, she could be a high school teacher introducing a bunch of kids to physics and calculus.
But these are lawyers and judges from all over Florida. And they've come to this seminar in Tampa to learn from the woman many consider the nation's foremost expert on fighting foreclosure.
An attorney with Jacksonville Area Legal Aid, the 51-year-old Charney has parlayed her own experience helping clients save their homes into a veritable crusade to protect millions of Americans from what she says are illegal foreclosures. Over the next eight hours, she will cite example on example of the sloppiness, deception and outright fraud — including forged signatures — in some of the 275,000 foreclosure suits filed nationally each month.
At the root of the problem are what Charney calls "feral loans'' — home loans that were sold, bundled into securities and sold to investors. They are skulking across the financial landscape like wild things whose true owners can be impossible to determine.
The companies filing foreclosure "don't own these loans and don't have any legal right to collect the debt,'' she tells the class. "If you're going to be able to stop foreclosures in your community, you need to know about these systemic failures.''
Since 2007, Charney has conducted 17 seminars from California to South Carolina, and trained more than 2,000 lawyers. Paid under $90,000 a year in her legal aid job, she receives no money for the class and insists that all participants donate 20 hours of pro bono legal work.
Charney's approach rankles foreclosure plaintiffs and even some judges, who say the challenges filed by her and her growing band of disciples simply delay the inevitable for homeowners months behind in their payments. But at a time when many attorneys are also feeling the pinch, this crowd of 180 shows that foreclosure defense is becoming one of the hottest areas of the law.
"I've never done foreclosures, but we all have to eat,'' says Raquel James, a corporate lawyer who has driven from Miami to hear Charney. "A lot of lawyers come across as cocky, but she's very humble. You can tell she cares about her clients.''
A mysterious name
A New Jersey native, Charney grew up in Miami, where her father worked for Eastern Airlines and her mother taught English. While in college, she served as a congressional intern but decided against politics because "I didn't like the sausage-making process.''
Instead, she went to law school and started a career that has taken her to Orlando, Arkansas and Sarasota, where she first taught other attorneys to fight foreclosures. But only after arriving at Jacksonville Area Legal Aid in 2004 did she notice a curious pattern.
"Every day there was a fresh batch of foreclosures,'' she recalls, "and every one was filed by MERS.''
Short for Mortgage Electronic Registration Systems, MERS was created in 1993 by the lending industry to track home loans, including those that had been repackaged as interest-bearing securities and sold to investors. If a securitized loan went into default, the company could foreclose on behalf of all investors, eliminating the need for hundreds of individuals to troop into court.
But Charney discovered that MERS didn't own the loan "notes'' — the borrower's obligation to repay — because they were still in the hands of the original lenders. So she began filing motions to dismiss all of the company's foreclosure suits, contending it had no right to collect the debt.
In 2005, Charney's cause got a major boost when she and other defense lawyers helped persuade Pinellas Circuit Judge Walt Logan that MERS lacked legal standing to sue and offered no recourse for homeowners struggling with their payments.
"Who is MERS?'' Logan wondered aloud. "These people are calling my office out of frustration and they want to deal, they want to refinance, they want to save their property, and there's no person (to talk to.)''
Ruling that the company was not the proper party to foreclose, Logan threw out nearly two dozen cases. Among them was that of Jose Montalvo, a disabled Coast Guard veteran who fell behind in payments on his St. Petersburg home when his wife, a hairdresser, hurt her shoulder and couldn't work.
"She's a firecracker,'' Montalvo says of Charney. "MERS sent like five or six attorneys from Miami and she got right in their faces.''
But the foreclosure was re-filed in 2006 — this time under the name of the original lender, Washington Mutual — and the case is still dragging on, leaving the Montalvos in limbo. They have not made a payment in years and they are reluctant to spend money on the house.
"We don't know if they're going to take it away the next day,'' he says. "It's very stressful.''
An appeals court reversed Logan's ruling in 2007. Though the reversal had no effect on the Montalvos, it did allow MERS to resume filing thousands of foreclosure suits under its own name.
Logan has since moved to family court, but a colleague still handling foreclosures, Thomas McGrady, says he too demands proof that MERS or any other plaintiff has the legal authority to collect the debt.
"It's very important that the right person bring the action, no doubt about that,'' says McGrady, one of eight Pinellas judges who heard a record 13,522 foreclosure cases last year, three times as many as in 2006.
Before signing a final judgment, McGrady asks for the name and phone number of someone the homeowner can contact to try to work out a settlement. He can also order both parties to mediation.
Some owners hire attorneys to challenge foreclosures, but "the success rate has not been good,'' McGrady says.
"I'm concerned that a lot of people will spend a lot of money for lawyers that might be better spent trying to save their homes. I'm not saying she (Charney) is wrong or that people are wrong to go to a lawyer, but the bottom line is that they got money they didn't pay back.''
'Ground is shifting'
Charney, who handles dozens of foreclosure cases herself, acknowledges that her own track record is mixed. She has saved homes when the original lender still held the note but has had zero success with securitized loans because it is so hard to find anyone to deal with.
"You have to do local servicing on residential mortgages,'' says Charney, who borrowed from a credit union to make sure that the loan for her Jacksonville house would not be sold. "We have to have flexibility in servicing and securitization does not allow that.''
At the seminar, Charney stresses that the "ground is shifting every day'' on foreclosure case law as new rulings come out. She is frustrated by judges who let plaintiffs foreclose even if they fail to follow correct procedures, like showing that loans have been legally assigned from one party to another.
"When clients in criminal cases are not read their rights, you're not going to convict them,'' she says. "Why are we so unable to make that leap to the civil context?''
After eight hours — most of it on her feet — Charney announces that class is over and "I'm pretty burnt out.'' But she patiently answers questions as lawyers crowd around her. "You were brilliant,'' some comment.
Charney shrugs off the praise. Separated from her husband, she says her great pride in life are her kids, Morgan, 23, an aspiring forensic anthropologist, and Katherine, 25, who's specializing in environmental law. The three are "joined at the hip,'' as Charney puts it, and camp and kayak together as she wrings time from a schedule that has her battling the nation's foreclosure wave many of her waking hours.
"I'm working way too much,'' she says after the seminar, sagging into a sofa at her Tampa hotel. "I feel like I've been drafted into an army.''
Susan Taylor Martin can be contacted at [email protected]