Shooting Ourselves in the Foot with Bullets

by Ben Carter

We are out of control with our PowerPoints. 


As a group, lawyers are the worst presenters I know. As a group, lawyers should be the best. We make our livings telling stories to clients, judges, and juries. Yet, give us a Powerpoint and we will oppress an otherwise interesting and important story into a brutal deathmarch of text-laden slides worthy of the Jackson Administration. We read from our slides (which consist of the notes for our talk) until a woman in the audience begins to wish that the bullets on the screen were lodged somewhere in her prefrontal cortex.

It doesn’t have to be this way.

Never has it been this easy to give[1] a great presentation. Whether you use Microsoft PowerPoint or Apple’s Keynote, either program can quickly incorporate interesting images that capture a key concept. You can find these images online and save them to your computer in an instant. The fonts available to us are limitless.[2] Beautiful templates are prepared for us and baked into the software.

Never has it been this hard to give a great presentation. I have been traveling the state with the Kentucky Law Update series to talk about our enduring foreclosure crisis. I present after lunch. When I walk in the room during the break, I see the half-finished crosswords. I see the Amazon Kindle’s poking out of purses, the iPads filled with games and email. I know what I’m up against. The demands on our audiences’ attention have never been greater.

It has never been harder to get and keep an audience’s attention. I am here to tell you a hard truth: your deep knowledge and compelling series of bullet-pointed slides that explain everything so obviously and logically is not enough. Not even close. If you want your audience’s attention, you are going to have to rip it out of their iPad’s cold, dead hands.[3]

For trial attorneys like me, our livelihood depends on our ability to give a good presentation. Having someone’s attention is a precondition to persuasion. But, even if you are never going to set foot in a courtroom, you still need to know how to give a good presentation. You still have a stake in helping us all become better presenters.

There are 17,000 members of the Kentucky Bar Association. Each of us are required to gather 12.5 hours of Continuing Legal Education credit each year. We comply by sitting through lots of presentations. Multiply our membership by a 25-year career and collectively we will endure about 5,312,000 hours of presentations before we retire.[4]

That’s a lot of crummy presentations.

There are some basic things we can do to make our presentations instantaneously less awful. First, do whatever you need to do to keep your audience’s attention. If the only way you can do this is by butchering a chicken while talking about subrogation rights or ERISA plans, bring a tarp to make cleanup easier. Let’s stop pretending this isn’t a show and that we’re not, in part, ringleaders.

Next, adhere to Guy Kawasaki’s 10–20–30 Rule. No more than 10 slides. No more than 20 minutes. Nothing less than 30-point font on your slide. Look, your slides shouldn’t be your notes.[5] Your notes are your notes. After you create your crappy presentation that just reflect the main things you want to say, hit “Print”. Those are your notes. Congratulations. Now create your presentation with 10 words–one per slide that capture your points. Better yet, pick ten pictures that enliven the concepts and entertain while you use your notes. Your slides should be in conversation with your words, not an echo of them.

Third, get curious about how to make your presentations better. Read Presentation Zen by Garr Reynolds or Beyond Bullet Points by Cliff Atkinson.

Finally, it’s time we start expecting more of ourselves and our colleagues than dry marches through case law and statutes. Obviously, imparting substantive knowledge needs to happen, but it’s time to stop pretending it’s our audience’s job to already be interested in our topics and it’s their fault if they don’t give us their undivided attention. Their failure to pay attention is our failure to capture it. Be brutal in evaluations. Demand more. If a presentation wasn’t great, give suggestions to make it better. If the presenter just phoned it in, say so.

Presentations matter. They matter to colleagues, clients, opposing counsel, and juries. At a minimum, five million hours of smart people’s time is at stake. Don’t let a bad presenter waste another hour of yours.

Ben Carter is an associate at Morris and Player, PLLC, a firm for plaintiffs. He is a consultant to the Network Center for Community Change on issues surrounding foreclosure, tax liens, and vacant and abandoned property. He welcomes your thoughts and ideas:

  1. When I say “give”, I mean it: a great presentation is a performance that stays with the audience. It is a gift.  ↩

  2. Please, stop using Calibri. When I see Calibri on the screen, the words I see are, “default.” As in: “The fact that this presentation is awful is default of the presenter.”  ↩

  3. I am aware that iPad’s do not technically have hearts and that they are, in fact, cold and dead already. You do not need to email me on this point.  ↩

  4. This doesn’t include all the time we spend in internal firm meetings that resemble the eye-popping scene from A Clockwork Orange ↩

  5. When was the last time you went to a movie and the screen was bifurcated: one side with the action and actors and the other side with a scrolling script? Exactly. Time to raise your game.  ↩

Typography for Lawyers: One Space, Double Spacing, and Other Good Ideas

by Ben Carter

This is an essay about typography.

What is typography? Basically, it’s how letters and words appear on the page, how individual words and chunks of text fit together. As lawyers, our livelihoods depend often on chunks of text. The thesis of this article is that small typographical improvements in your resumes, letters, briefs, and presentations can make a dramatic difference in your ability to effectively communicate and persuade.

Better typography improves your chances in mediations, in court, and in trial.

I need to make two points before I even get started. First, and perhaps already obviously, I am a nerd. How much of a nerd? I still own a 20-sided die. The best way to get me to corner you at a party is to mention in an offhanded way that you need to get a scanner (at which point, I will rhapsodize about the Fujitsu Scansnap 1500 for 20 minutes as the ice melts in your cocktail). As you will see, I’m the kind of nerd who can’t resist making a reference to Weird Al Yankovich’s cult classic UHF even in an article in which I hope to impress my peers.

I’m the kind of nerd that says, “Hell, yes!” when I discover that some typeface-designer-turned-lawyer has written a book about typography and the practice of law.[1] This is my second point: almost everything I have learned about typography I learned from Matthew Butterick and his excellent website, and book, Typography for Lawyers. Butterick is a Harvard-trained typeface designer and a graduate of the University of California Berkeley’s Boalt Hall. So, he’s kind of in his wheelhouse on the subject of typography for lawyers.

I recognize that not everyone has attained the same nerd heights as me and may not want to read an entire book about typography. This is an attempt at a summary. Still, I highly recommend getting the book. I refer to it each time I write a brief. It contains great examples of before and after improvements to business cards, resumes, correspondence, and legal briefs. Further, it contains detail that can only be captured in a book; Butterick explains the proper use of em dashes and en dashes and hyphens, the nuances of non-breaking spaces and non-breaking hyphens, the dark art of letter spacing. So, get the book.

Plaintiffs attorneys would do well to adopt better typographical practices now rather than later. Law schools across the country are using Butterick’s book as part of their legal writing curriculum. The federal clerks who are reading your briefs will know the best typographical practices and will judge you and your failure to adopt them. Further, as I mentioned above, better typography produces briefs, letters, and exhibits that are easier to read and therefore more likely to be read and understood.

Plaintiffs attorneys have a brief window in which adopting better typography will provide us with a subtle advantage. The defense bar will eventually adopt better typographical practices and then our failure to use them ourselves will disadvantage us and our clients.

So, let’s get started on improving our work product with better typography. I will begin with some practices that will improve all of your documents, including your briefs, and then discuss the impact of court rules regarding margins and line spacing in briefs.

Use One Space after Punctuation

Modern typographical best practices flow from an appreciation of a fact that has eluded many attorneys: we have computers now, not typewriters[2]. We learned to type (or our typing teachers learned to type) on typewriters that used a monospace font. That is, every letter, whether it’s a fat “m” or a skinny “i”, was stamped on a piece of metal that was the same width as all the other characters. Using two spaces after punctuation in a monospace font is acceptable (but even there, unnecessary). On computers, however, we are blessed with proportional fonts–fonts with varying letter widths. Using two spaces after a proportional font is a vestige of our days from the typewriter. It is, as Butterick says, “an obsolete habit”. As he says in his book and website:

Some top­ics in this book will involve dis­cre­tionary choices. Not this one. Always put exactly one space between sen­tences. Or more gen­er­ally: put exactly one space after any punc­tu­a­tion.

One space. Period.

Okay, with that sacred cow slaughtered, let’s move on…

Use Bold or Italic Type for Emphasis

Do not use underlining. Again, underlining is a vestige from our typewriter days when there simply was no other option but to use underlining to add emphasis. Bold type and italic type just weren’t available on typewriters. Bold and italic type are the typographical equivalent of the electronic unlocking mechanism on your car. When was the last time you actually unlocked your car with your key?

Use better tools: bold and italic typefaces are more elegant and less disruptive to the eye than underlined text.

Justify Your Text on the Left

There’s really not much to this rule except to say that studies have shown that left-justified text is easier to read than text that is justified on both sides. In a left-justified document, the reader’s eyes use the nonuniform breaks along the right side of the page as a subtle guide to find the beginning of the next line of text.

Unlike the two previous rules, you do not have to stop justifying your text on both sides if you don’t want to. Know that you are making your reader’s job more difficult, but justifying on both margins is still acceptable practice. If you justify on both sides, however, you are required to turn on hyphenation in your word processor. Hyphenation will help you avoid the unsightly gaps in text that can occur in documents justified on both sides. These gaps, like the double spaces after periods, are little tiny speed bumps for the reader’s eyes as they travel across the page.

Look, I should probably be explicit about this now that I’ve used the phrase “little tiny speed bumps for your reader’s eyes”: I write my briefs with the understanding that judges and their law clerks are drinking from the fire hose. Like little Joe Miller in UHF, judges and law clerks found the marble in the oatmeal and now their reward is to read tens of thousands of pages of lawyers’ briefs each year. My baseline assumption about my audience is that they are drowning and are looking for basically any reason to stop reading my brief. Given this assumption, a lot of “little tiny speed bumps” in my brief are a really big problem for me.

Use a Nice Font

Fonts are what most people think of when they hear the word “ typography”. I hope my ranting so far has given you a sense that fonts (technically, typefaces) are just a small element of good typography.

Consider investing in a nice font. Butterick has designed a typeface, Equity, to meet the special needs of attorneys. It is polished, tight, and its italic is beautiful. Seriously, I find myself trying to find reasons to italicize words when writing with Equity. It’s available for purchase on his website. He also has recommendations for replacements for your Times New Roman and other common system fonts that are preinstalled on your computer and make your work look like everyone else’s work.

Avoid All Caps

Many attorneys rely on ALL CAPS as a way to emphasize their most important points and in the headings of their briefs. This is not a useful practice. ALL CAPS IS ACTUALLY HARDER TO READ than regular text. Butterick allows for a single line of all caps text, but no more. Personally, I try to avoid it whenever possible.

A bolded, underlined, all caps heading is just an invitation to your reader to skip past it.

On a related note, if you have a case which involves the question of whether a provision in a contract is clear and conspicuous, Butterick is available to serve as an expert witness. I think his services would be especially useful in consumer cases which involve contracts that contain paragraph upon paragraph upon paragraph of all caps text. The science is in: this text is difficult to read.

Every court promulgates rules regarding typography. These rules are designed to promote fairness, uniformity, and legibility by forbidding attorneys from engaging in the worst typographical practices in an effort to squeeze more words onto a page. These rules have their most dramatic impact on line length (margin rules) and line spacing (the requirement that the lines be double-spaced).

Shorten Your Lines Outside of Briefs

“Shorter lines are easier to read than longer lines,” says Butterick. Ideally, your line will be between 45 and 90 characters, including spaces. Most courts in Kentucky require one-inch margins on both the left and right. (The appellate courts require 1 1/2" margins on the left.) At these margins, your 12-pt Times New Roman line is going to have more characters than the recommended maximum of ninety. Outside of lobbying for a rule change, there’s nothing you can do.

Move on to something you can fix: your line lengths in your letters, interoffice memorandum, and presentations. For me, shortening my line lengths was a revelation; this small change led to an immediate improvement in the look and readability of my letters.

Use True Double Spacing for Better Briefs

The ideal line spacing is 120–145% of your font size. That is, if you are using a 12-point font, you should set your line spacing between 14.4 and 17.4. Personally, for my out-of-court documents, I use 15-point spacing. It provides a little more space between the lines than the “single spacing” setting (which makes words look cramped and is difficult to read).

Most courts require us to double space our briefs.[3] CR 76.12(4)(a)(ii) requires us to use “black type no smaller than 12 point” and typing that is “double spaced and clearly readable.” The court’s requirement to double space your briefs does not mean, however, that you just go into Microsoft Word and pound the “double space” button. True double spacing for a 12-point font means setting your line spacing at “Exactly” 24 points. Using Microsoft Word’s default “double space” will give you line spacing greater than 24 points–about 15% greater, in fact. This translates to having 2–3 fewer lines on a 8 1/2“ x 11” page.

In other words, if you are using Microsoft Word’s default “double space” setting for your pleadings, you are hurting yourself in two ways: 1) you are making your document less legible by putting more space than ideal between your lines and 2) you are making your document longer than it needs to be. Because our courts set maximum page limits (rather than word limits), this means you are giving yourself (and your client) fewer words to explain your position than you would otherwise have available to you.

How many times have you been on page twenty-six and need to slim a brief down to twenty-five pages? True double spacing will give you more words and those words will look better on the page.

There: I just gave you a way to be more verbose than you already are. For that and for all the other typographical wisdom (cribbed entirely from Matthew Butterick), you’re welcome.

Sometimes it pays to know nerds.

  1. The only other lawyer I knew personally that had read Typography for Lawyers and cared about this stuff at all was Finis Price. I miss that guy.  ↩

  2. For anyone reading this still using a typewriter: you need help this article cannot provide. Please stop reading.  ↩

  3. I’ve looked through Jefferson County’s local rules and can’t find a double-spacing requirement anywhere. Nonetheless, I think the court would look askance at anything not double-spaced.  ↩

My Big Edit: A Lightening

by Ben Carter

Here’s how all this started: it was time to move my summer clothes on to my shelves and my winter sweaters into the plastic tubs where they live six months of the year.

I looked at my sweaters and all my t-shirts and all my button-down shirts and thought, “You know, I’m really not using 75% of this stuff.” So, I started putting some my clothes in boxes. Boxes to donate and boxes to throw away. I had lots of boxes. Good boxes. In fact, in my basement I had a whole shelf of boxes inside of boxes inside of boxes.

And here’s the thing: I did a really good job.

Suddenly, all the t-shirts that I owned fit on one shelf; only the sweaters that I actually wore this year went into a plastic tub for next year. I threw away socks that I never wore, underwear that was well past their expiration date. Well past. I will spare you the details.

And I looked up from my closet—my manageable and useful closet filled with only clothes I use and love—and looked around my basement (that’s right, I dress in my basement next to my lawnmower) and saw piles of stuff that I just never was going to use. A bike that came with the house that is too big for Erin and too small (and too girly) for me, supplies for applying plaster to my home’s walls, a mosquito net from my time in Thailand. Once my clothes shelves were clean, they stood in high relief against the clutter surrounding them.

I walked upstairs, and saw books that I was never going to read, LPs I never listened to, two file cabinets full of files on which I rarely relied or needed, and in the guest bedroom another five shelves of the detritus of my life: notes passed to me in middle school, postcards I sent my family from Europe, 20 different forms of ID [1], hundreds of letters written to me while I was at summer camp, while I was at Davidson, while I was in Ghana or Peru or Thailand. Maps. Maps of bicycling routes in Europe. Trains schedules from China. Legal pads filled with notes I took during client meetings and during trials as one of two Public Defenders in Palau.

*  *  *

I have never had a good memory. People who know me know I have a hard time holding onto even the thread of a conversation, much less remembering a moment earlier that week, last month, last year.

I realized this truth about myself as a teenager and began collecting scraps of paper, notes, ticket stubs, business cards, brochures, photographs in an attempt to create a more reliable record of my life; one that was not contingent upon the tenuous biochemistry of my faulty noggin. In my house I have a fireproof box, filled with pocket-size notebooks containing whole conversations, grocery lists, poems, and ideas for poems. If it’s not written down, it didn’t happen. I think FDR said that.

About this time (by which I mean “about the time I began recognizing just how much stuff was in my house that no longer had any utility”), I was listening to one of my nerdy podcasts when my favorite nerdy podcaster of them all, Merlin Mann, started talking about clutter. On S1E56 of his podcast, Back to Work, he spoke knowingly (and quickly) about the psychological weight of clutter, the burden of our things. He mentioned a book called, It’s All Too Much, by Peter Walsh.

Then, three or four days later, I was staining my deck and listening to Andy Ihnatko on his podcast (also on the mighty 5by5 network, also co-hosted by my internet pal, Dan Benjamin), The Ihnatko Almanac. I listen to a lot of nerdy podcasts. On this particular episode, Andy spoke eloquently and thoughtfully about the importance of conducting what he called “The Big Edit”. Andy describes the process of going through your crib and “touching everything you own.” The idea of editing your stuff immediately appealed to me and provides the right frame for thinking about the work.

If you’re considering attempting your own Big Edit, I recommend you listen to Merlin and Andy’s podcasts and read Peter Walsh’s book before you start.

What these guys—Merlin, Peter, and Andy—will tell you (and what I’m about to tell you) is not the “tips and tricks” of organizing—any joker/charlatan can tell you what kind of plastic tub to buy for your handbags. (This joker will tell you some of the logistics that worked for me later in this essay).

Instead, what these guys will help you understand is that facing your stuff is an intensely emotional experience. Digging through old letters, organizing photographs: these activities will require you to confront your relationship with your parents, with past lovers, with old friends who with the passage of time are no longer friends. During a Big Edit you will confront the reality of the distance now gulfing you and the people you used to love. Whether you have children or not, you will have to confront the ghosts of people you don’t know yet, may never know. Maybe you keep things around because you expect your children to care—one day—about your life.

Maybe digging through your things will make you wonder whether anyone will ever care about your life, your things. The things you love.

And suddenly I am reminded, specifically and clearly, of a poem I once heard Garrison Keillor read on The Writer’s Almanac by Jim Moore:

It Is Not the Fact That I Will Die That I Mind[2]

We can feel about our things the way Jim Moore feels about his family, about his oak tree. We love these things and people so dearly. So palpably. We fear that if we let go of the pitcher our grandmother left behind, we will be letting go of our grandmother. And we fear that no one knows how to love the way we do. Facing our things, we are forced to confront the very real possibility that no one will ever care for the things in our lives and the events those things represent the way we do. It’s just brutal.

If you’re like me, you done some pretty dumb stuff in the past. A Big Edit will require you to remember past harms you’ve inflicted and passed harms that were inflicted upon you.

All of this is to say that excavating the dark, cluttered pockets of your house means excavating the dark, cluttered spaces of your psyche. I think this is the primary driver of clutter: the fear of addressing the emotions attached to our stuff. We know that if we had a map of our houses and our minds, the cluttered areas in both would be marked: “There Be Dragons.”

A Big Edit doesn’t just dredge the past; it also demands an evaluation of the present and future. It requires the editor to acknowledge the true nature of her life as she currently lives it.

It became very clear to me very quickly that I no longer have international adventures the way I once did and that I do not have the time or inclination to listen to the 250 LPs I own. I thought I was a guy who likes music; turns out, I would rather listen to nerdy podcasts.

During the Big Edit, you will have to confront your own mortality. For me, this happened at my bookshelf. Gazing over the spines of unread books and read books I’d hoped to read again, I began to be able to say to myself, “I’m never going to read that book.”

If I had all the time in the world, maybe. But I do not have all the time world. Not even close.

So, confronting your stuff is hard. There’s a reason it’s called baggage.


The Big Edit is not just morose morbidity. If it were, we’d probably all be better off pursuing self immolation. I have to admit: I really enjoy the process of “touching everything I own” and deciding what needs to happen to it. The Big Edit is an opportunity to acknowledge and appreciate the past, take an inventory (mostly psychological but, yes, also physical) of your present life, and plan for the future you want to inhabit.

More than anything, it’s an opportunity to say, “I’m moving on.” I find “moving on” to be a useful mantra during this process.

In some ways, a Big Edit is a process of allowing the past to weaken in its grip upon you. I kept hundreds of notes and letters from friends, from girlfriends, from girls that I wanted to be my girlfriends, from teachers, from teachers that I wanted to be my girlfriends, from Wendell Berry, and from my granny. Reading over these notes and letters reminded me of how earnestly I approached these relationships, how involved my emotions were. Revisiting those moments, many now over a decade old, I don’t view those emotions as silly or misplaced, but I can recognize—now—their impermanence. The emotions that were so earnest, so important were, after all, fleeting. That’s a lesson worth remembering.

As I told a friend:

One of the best gifts I gained from looking at, literally, every single piece of paper I ever collected, is a sense of levity, lightness, distance from my present-day emotions. Reviewing all of these documents—tokens of deeply held beliefs, deeply felt emotions—gives me faith that today's emotions, whether good or bad (usually, mostly good), will also fade. It's almost liberating. I'm using religious words not unpurposefully.

I think the word I was looking for was "enlightening". 

I’m thirty-three now, but I haven’t stopped having emotions; it’s useful to know that one day I’ll be able to enjoy the same distance from present-day events as I now enjoy from the events captured on notes scribbled and passed in between classes at Russell High School.

A Big Edit is primarily a psychological exercise. It is worth investing some time before you begin to get into the right state of mind before you begin because once you find it, the rest of the work is a joy.

*  *  *

Okay, I want to talk high-level logistics quickly, and then move on to specific problems and how I solve them. There are essentially 4 things that can happen with any piece of your stuff. You can:

  1. Trash it
  2. Donate it
  3. Sell it
  4. Or keep it.

So, as you go through your things, you’ll want three bins in which to toss things (trash, donations, sales). These should be large bins.

Let’s talk about each of these for a moment.

“Trash It”

This ought to be your default mindset. That is, if you’re going to decide to do anything with a thing but trash it, you’ve got to have a reason: because you either love it or use it. Hopefully, both.

It’s called a Big Edit.

“Donate It”

Donating something is a useful compromise between trashing an item in keeping it in my house. The story I tell myself when I’m donating an item is that I am helping that item achieve it’s highest in best purpose by allowing someone else to put it to better use then it’s currently serving in my house. One caveat: don’t donate junk. If you don’t have a use for it, or it’s not in good enough condition for you to use it, ask yourself whether it’s likely this item will be purchased. Goodwills and other charities get plenty of junk and borderline junk. They don’t need yours. Just trash it.

Speaking of charities, my church is having a yard sale on June 16. We would be happy to receive your non-junk donations in the days leading up to our rain or shine yard sale. Just contact me for more info. In the alternative, you’re welcome to come and by some of our non-junk stuff on June 16.

Final point: make sure to keep track of your donations and document those donations as charitable gifts. Your future self will thank you for the tax deduction.

“Sell It”

After you’ve decided to sell an item, I want you ask yourself a question: “Really?”

Is it really worth your time to list your George Foreman Grill on Craigslist and meet some sketchy sketcherton at a coffee shop for 5 bucks? If the answer is yes, go for it. But, I would encourage you to use your limited time and energy towards finishing the big edit and moving on.

If you are determined to sell something, obviously eBay and Craigslist are resources you want to explore. Consignment shops are an efficient way to sell clothes and jewelry. For electronics, I recommend

Think long and hard about trying to sell your books. It’s rarely worth the effort. Recent editions of expensive textbooks? Maybe. Check out for going rates of the books. Your dog-eared copy of One Hundred Years of Solitude? Nope. A resource I’ve used in the past is This service allows you to list books you are willing to ship (at your expense) to other bookmoochers and you can search for books you want to read and then mooch them for free from other book moochers.

“Keep It”

Anything you’re not trashing, donating, or selling, you’re keeping. This is not an organization essay. I’m not going to tell you how to organize the stuff you keep. This is an essay about how to keep less stuff.

A final note on big picture logistics: as you dig through your crap, the litter box of your life, you will invariably find clothes that need to be taken to the dry cleaner, buttons that need to be sewn back onto jackets. You will discover that the cat peed on your mop and that you need a new one. You will need to keep a list of all the things that need getting done sometime later.

I use OmniFocus, but that’s because I’m awesome. If you want to use pencil and paper, that works, too.

My only other advice is to create contexts for the things you need to do. For example, keep all of the errands you need to run in a list called “Errands”. Keep all the things you need to discuss with your spouse in a list titled “Shithead”. Group calls under “Calls” and additional tasks to be performed at your house under “Home”. If this sounds simple and obvious, good for you. It took me twenty-seven years and reading an entire book (Getting Things Done) to figure this out.

*  *  *

Okay, let’s talk about specific things in your house you might deal with them.


Because this whole bonanza began in my wardrobe, let’s start with clothes. Unlike paper products (which we’ll get to), I don’t have a lot to say about this. If you haven’t worn it in a year, you should really, really consider tossing it. The hardest part for me was figuring out what to do with the approximately fifty-thousand t-shirts I owned. Most of the t-shirts I have (or had), I have for the memories: the vacation I took to Montana, the race I ran in high school. Or, they are gifts to me, amazing gifts, like when Andrew Griswold gave me a navy blue t-shirt that said only “Louis Lamour is the American West”. When we were twenty-one, Andrew and I drove 18 hours straight from Austin, Texas to Albuquerque, New Mexico (with a brief, early-morning detour to Billy the Kid’s grave). We read Lamour’s Silver Canyon to keep each other awake.

I can’t tell you how much joy the t-shirt gave me, and still gives me, because you know what? I kept it. If you love it, if it still has use, keep it. There are other t-shirts, many other t-shirts, that I donated or threw away. For some of them, I took the pictures before they went away.

Now, some of you are reading this and regard taking a picture of a t-shirt as a rather nutty thing to do. Frankly, I can’t believe you’re still reading this essay. I would’ve figured you would’ve stopped a long time ago. For most of you still reading, you are probably nodding your head when you hear me explain that I took a picture of a t-shirt for throwing it away. Most of you will understand, again, just how deeply emotional this process is.

Will I ever go back and look at my t-shirt collection pictures? Probably not. But taking the photographs helped me part with the t-shirts in two ways.

  1. It provided the reassurance that if I wanted to see the t-shirt and remember the time I bought that t-shirt in Austin Texas, back when I had a music blog with my best friends, if I want to remember that, I’ve got a picture.
  2. Taking five seconds take a photograph is a small way of honoring a thing.

Think long and hard about donating clothes. Donate only clothes you would buy. As painful as it may be, the t-shirt you spent 2 decades “breaking in” is just ratty. Toss it.

The great thing about getting aggressive with your wardrobe it’s how much space you can reclaim. And, how much nicer it is to dress for work without digging. Your wardrobe contains only the best fitting, best looking options.

We haven’t even talked about the benefits of the Big Edit (other than the psychological benefit that arises from the opportunity to say “moving on”) because I figured the benefits of this project would be self-evident to anyone interested in undertaking the task (or reading this far into this essay). Quickly: the increased efficiency of living in a space where everything has a place and purpose is remarkable. Furthermore, the increased calm from confronting a cleaner visual landscape is real.

Moving on.


For me, the biggest challenge was paper. When I was seventee years old, I began to realize that I was forgetting a lot of my life that was worth remembering. Conversations I had with people I loved, thoughts that appeared novel and delightful, moments heavy with meaning[3]. Entrusted only to my flighty brain and these things–these precious things–were gone.

So, I started collecting paper to help me remember: playbills, ticket stubs, subway maps, receipts, postcards, letters, notes, notebooks, printed e-mails.

My file cabinets—I had 3 of them: two at home and one at the office—were just filled with nostalgia and memories. I had files for things to do in Louisville, files for places I wanted to camp, files for home ideas, poem ideas. Hell, do I need to say more than, “I’m an English major and a lawyer”? I had drafts of old essays, multiple copies of finished essays. An entire file cabinet was full of all of my legal research: foreclosure defense, consumer protection, insurance bad faith, legal negligence, standards for summary judgment, for motions to dismiss. Articles about poor peoples’ right to counsel, about residential mortgage-backed securities, about predatory lending.

I love to write and my friends love to write. I probably have, (or had) four feet of letters from them.

I am not kidding.

There was no way I was just going to throw this all away.

Like taking a photograph of old t-shirts, I needed a way to preserve the paper before I could part with the paper. I needed a scanner. If nothing else, the scanner would allow need to engage in the fiction that one day I will return and revisit these documents, these memories.

Here’s my advice: if you’re going to scan more than two sheets of paper (ever), buy a Fujitsu scanner.

Look, we could do this the easy way or the hard way. I could spend the next 18 paragraphs telling you technical details of the Fujitsu line of scanners, particularly the ScanSnap 1500M[4]; or you could just say to yourself, “Gee, Ben seems like a huge nerd and really, really, (unhealthfully) into this stuff, so I guess he knows what he’s talking about” and go buy one.


From eleven feet of paper to this...

The ScanSnap 1500 scans up to fifty pages at a time from the top-loading tray and scans them quickly. It scans both sides. It knows when the back side is blank and doesn’t scan it. The scanner performs optical character recognition. While scanning. It comes with Adobe Acrobat 9. Best of all, the built-in software is bombproof and allows you to automatically save scans to a specific folder and integrates stunningly well with Evernote.

What’s that? “What’s Evernote?” you ask?

Welcome to your future.

Evernote is a service that allows you to throw almost anything you want into the cloud. [5] But, unlike Dropbox or other cloud-based file storage systems, Evernote has obviously done a lot of thinking about how users want to capture information and, perhaps more importantly, how users want to retrieve information.

Because the benefits of Evernote are not immediately obvious, I want to spend a couple of paragraphs talking about a few things Evernote does. Your eyes will grow wider and your jaw will drop a little further as you reflect on the potential uses for this application ($45/year for the premium version) in your life.

For my lawyer friends out there: consider your legal research. How many times have you said something like this to yourself, a partner, or an associate: “ I know there’s a case on this. A kid got hit by a bicycle. The judge dismissed the case for lack of prosecution even though it appeared the defense was dragging its feet on discovery.”

So, you go to Westlaw, and, like an animal, you type in some Boolean bullshit like:

bicycle /p dismiss! /5 “lack of prosecution”


If you had that case in Evernote (because you scanned it into Evernote effortlessly with your Fujitsu or because you printed a .pdf while you were researching your prior case and saved it to Evernote), here’s what would have happened: When you uploaded that .pdf or .doc into Evernote, the service would automatically (with a premium version) OCR[6] the document. Then, any search you run in Evernote will include the OCRed text of each document. So, if you remember roughly what the case is about, or what attorney was involved, or a bit of language from the case—basically anything, if you remember basically anything about the case—a search of the OCRed text will allow you to narrow your search of your documents down to just a few possibilities.

And, what’s more, Evernote allows you to tag each note with keywords so that your future self can even more easily find the case your past self was smart enough and kind enough to save and catalog. In the example above, this case would be tagged with keywords like “motion to dismiss”, “ lack of prosecution”, [Name of Client], “discovery”.

So, let’s just pretend your boss just ask you to write a response to a motion to dismiss. Sure, you probably want to try and find a previous response to a motion to dismiss that you can plagiarize for some of the applicable standards. But, you are also going to want to consult the cases in you’re Evernote that you have wisely tagged with a “motion to dismiss” tag.

So, data retrieval is awesome in Evernote. But, getting data and Evernote is just as awesome. I’ve already discussed (and will not belabor the point) that using Evernote and a Fujitsu ScanSnap together is basically the closest thing to magic I’ve outside of my dog’s frisbee-catching skills and the civil discovery process (in which powerful defendants give me information I need to help me prove my case against them).

Evernote has a web application, a PC application, a Mac application, and versions for your iOS (iPhone and iPad) or Android mobile device. Your data is never not with you and you always have a way to capture and upload new things. The mobile applications work with your device’s camera, so inside the Evernote application, you can take a picture, tag it, and save it to your Evernote. Think: receipts on a business trip, business cards, menus. Oh, and when you upload a picture to Evernote, the program will read the text in the photograph and will return that photograph in search results asking for text contained in the photograph.


Evernote is not just for scanned content or photographs. Perhaps the easiest way to use Evernote is as a place to preserve and organize web content. Just press a little button the friendly Evernote folks have made for your browser and—boom—new note. I use this for recipes, incredible blog posts, research, or sites that I’ll want to remember in five years. You could use it, along with a tag like “read later” as for a read later list (though for a “read later” list I personally prefer and recommend Instapaper by Marco Arment.

So, I use my scanner and Evernote for things that I want to catalog, tag, and have access to wherever I am. But most of the things that I encountered during my Big Edit were letters and memorabilia that I just wanted to scan and preserve. Those things did not go into Evernote. Instead, I just created a folder on my hard drive called “File Folder” and created subfolders for the different times in my life. Then, as I was sorting through all of my crap, the papers just went in stacks of varying sizes: middle school, high school, Davidson (subfolders for each year and for time abroad), etc. Then, when it came time to scan each of the stacks, I basically just created one big file (or a few big files) under each folder.


Maybe here’s a good place to talk briefly about the importance of not going overboard with your personal taxonomy. You are not Carl Linnaeus. Try to anticipate how often you’ll need the information that you’re scanning or saving and make the detail of your classification system directly proportional to the frequency with which you will be accessing the documents. I don’t expect to travel down Memory Lane but once every 5 or 10 years, so one or two big files that capture my freshman year in college—untagged, unclassified, unindexed—is just fine. Remember, your mantra during your Big Edit should be: “moving on.” Getting bogged down in developing and maintaining a detailed taxonomy of your crap is a great way to never move on.

Return to Sender

As I was sorting through all of my stuff, I came across a number of letters and notes that I just couldn’t bear to toss. Long, touching letters from people who were or remain dear to me. Short, hilarious notes left on my dorm room door.

Instead of tossing them (and instead of keeping them), I instituted what I called (to myself) the “Return to Sender” program. It is exactly what it sounds like. Last week, I shipped off probably a foot of old letters to past loves, good friends, best friends, and family.

There will probably always be things that I leave unsaid that should instead be said. (There are a lot of things I leave unsaid because even I know they should be left unsaid.) But, in the letters I wrote to accompany the returned letters, I said a lot of things that had needed saying for a while.

Look, if you’re this far into this essay, you probably are already invested into some of the outcomes that flow from The Big Edit: cleaner house, less hassle trying to find stuff, a kind of calm that arises from this ritual purge. But, add to this the opportunity to renew your gratitude for the people in your life and gain new perspective and even closure on old, perhaps painful, relationships. Combining a Big Edit with a Return to Sender Project became an unexpectedly powerful process of…what? Purification? Healing? Understanding? Thanksgiving?

All of that.

*  *  *

Okay, so that’s paper. What about all the other stuff in the house? Again, if you want a longer exposition on each room, please read It’s All Too Much by Peter Walsh. It’s great. I just want to run through a few of the things that worked for me when dealing with kitchen utensils, memorabilia, photos, books, movies, and LPs.

Kitchen utensils

Take all the kitchen utensils in your drawer(s). Dump them into a box. Put the box in the corner of the kitchen and as you need something, put it back in the drawer(s). At the end of the month, take the utensils that are still in the box somewhere else (the basement, the trash, the Goodwill). I enjoy cooking so much more now that I’m not digging around eighteen different useless implements to find the spatula.

Memorabilia (and by this I mean tangible objects that hold a memory, not “baseball cards”)

Like hilarious t-shirts, take a picture, throw it out, and move on. Either that, or keep it and display it in a way that honors the thing and the memory, as Peter Walsh would say.

Memorabilia is hard because we feel like if we toss the thing, were tossing the memory and potentially disrespecting the subject of the memory (often grandparents). I find taking a photograph helps by reassuring me that’s some record of the thing has been preserved.

Photos (and an aside about computer backups)

I use to make a digital copy of every single one of my hardcopy photographs. When returns my photos to me, I’m not throwing them away. I’m not crazy; I’m storing them. Photos are too important to leave only in digital format.

While were talking about photographs and preserving them, I want to talk about developing a vigilant backup system for your computer files. Observant readers will have already noticed that many of the solutions to problems I encountered during my Big Edit involve digitizing memories. It has always been reckless to not have a backup system in place, but in 2012 the backup solutions are so convenient and so accessible to even non-nerds that a failure to backup your data has migrated fro reckless and is now simply inexcusable.

If you are a Mac user, take advantage of the Time Machine functionality in your operating system. I combine Time Machine with a Time Capsule router for automatic wireless backups.

Because one backup is not enough (especially if that backup is also going to be at your house), consider using a program called SuperDuper to create an exact copy of your hard drive on an external disk. Store that external disk at your office or some other off-site location. Every six weeks to two months, use SuperDuper to wipe the external disk and create a new backup of your hard drive.

Regardless of what operating system you use, explore online backup solutions. There are many available. At present I don’t use one, but hear good things about both Mozy and Crash Plan. Online storage has the twin benefits of being convenient and off-site. Whatever backup system you use should include your data going to a place that is not your home. (When thieves break in, they take everything. When fire breaks in, it burns everything.)

There is an entire Mac Power Users episode about backup and I highly encourage you to listen to that episode before making any decisions about what backup system is right for you.

Seriously, this is too important not to get right. Don’t be an ass: back up your data.

Media: Books, Movies, and LPs


Books are brutal. Asking me to throw away the book, or donate a book, or sell a book, is like asking me to give away a portion of my brain. Or, a potential portion of my brain in the case of a book I haven’t yet read. I support organ donation. Someday. Not yet.

In college, my favorite day of the semester was the day I went to the bookstore and got all of the books for my classes. I was an English major and even for an English major I took far too many English classes. I bought a lot of books. I enjoyed Book Buying Day so much because the books were so heavy. And, as I carried them across Davidson’s small campus I would look down at the box and think, “In just three months all these books will be in my head and weigh nothing. What’s more, they will be bouncing and jostling around with all of the other books that live up there.”

Books remind me who I was, who I am, and who I want to be. Sitting at my desk in the living room, I can look across the room at my bookshelf and remember that I am a person who loves the outdoors, loves Kentucky, cares deeply about politics, and who shambles toward some semblance of a spiritual life.

Confronting my bookshelf is confronting myself and the reality that I have increasingly less time in my life to read. I have to confront the fact that all those books I aspire to read again will likely go unread. And so many books that I hope to read for the first time will similarly remain unread. This is a minor tragedy to me. But it’s reality.

Now, this doesn’t mean that I tossed all my books—not even close—I still kept a lot of books that I hope to one day read, either for the first time or again. I kept a lot of books that I expect I will give away to someone who says the magic words to me some night at a party. And I kept all of my grandmother’s books. I’m not crazy.

But, what I did do was be real with myself about the time I have available for reading. Five boxes of my precious books are now sitting at my church awaiting our yard sale. By June, there will likely be two or three more. It was hard.

Moving on.


I don’t have a ton of DVDs, so I am not concerned about reducing them to files on my hard drive. But, I do have a friend who has ripped all of his DVDs onto a hard drive and connected that hard drive to his PlayStation. Now, he has immediate access to all of his movies from his Playstation controller. He loves it and it appears to work well for him.


(For people without LPs, please skip to the next section. These are not the droids you are looking for.)

My record collection was perhaps the most obvious disconnect in my house between the reality of my life and the reality of things I owned. Gathered at yard sales over many weekends in my 20s, I’ve got a pretty good collection of some of my favorite music.

Favorite music that I never listen to.

The reality is, I listen to nerdy podcasts, not music. So, I decided to sell my LPs or at least donate them to my church’s yard sale. Before I did that though, I again relied on technology to help me digitize some of my favorite albums.

I used a program called SoundSaver, an application that works on either Mac or Windows machines, and used the Alesis MultiMix 8 USB soundboard [7] to interface between my record player and my MacBook Air. And, I listened to the records as this rig recorded them on my Tivoli Model One. They sounded great through this little guy. 

SoundSaver is a pretty good application. It advertises itself as capable of detecting tract breaks and automatically finding album information like track names. In the best case scenario, the automatic track detection will get you close. You will still need to go into the waveform and manually set each track break. Let me put it this way, you’ll have the opportunity to listen to a lot of the beginnings and ends of songs you own as you place the breaks yourself or ensure that the automatically placed breaks are accurate.

When you’re using automatic track recognition, tell the program the exact number of tracks on the album (don’t use auto), set the “seconds of silence” to “4” and the silence threshold at 1%. These settings gave me the best results, but even on the settings each track will start about half a second after the song actually starts. Which is annoying.

The good news is, once you set the tracks, you can tell SoundSaver the name of the artist and the name of the album and it will automatically (usually) name each of the tracks for you. This saves a lot of typing.

All in all, I’m happy with the app, though more accurate track recognition and the ability to scroll horizontally across the waveform with Apple’s Magic Mouse or Magic Trackpad gestures would be amazing.

After having wrestled with SoundSaver for hours (weekends), please don’t tell me if there is a better product on the market.

I initially started out digitizing my LPs with the goal of getting rid of all my records and my record player. Fortunately (or unfortunately), I had so much fun in the process of listening to and editing many of my favorite albums, I have abandoned my plan of going entirely digital. Instead, I plan on keeping the record player and ten or fifteen of my favorite albums and adding a few to my pared-down collection each year. People who pine for vinyl will understand how this could happen.

*  *  *

So, I think that’s about it. This was my Big Edit during which I battled dragons, rocked out, got dirty, and got grateful. It was a hell of a good time.

Moving on…

  1. All identifying me as me, except for the Elvis driver’s license I picked up at Graceland in 1996 and used as a joke with bouncers for years. They found it hilarious. Always. Bouncers: unanimously affectionate for Elvis and tolerant of the shenanigans of the underaged.  ↩

  2. It’s as though this poem was hand-crafted to be read aloud by Garrison Keillor  ↩

  3. For those who remember being seventeen, you’ll remember there are a lot of moments heavy with meaning.  ↩

  4. I got the S1500M, which is the Mac-specific variety of this scanner. For PC users, you’ll want to rock the standard ScanSnap 1500.  ↩

  5. Big ups to fellow attorney Tad Thomas for turning me onto the usefulness of Evernote as a research repository.  ↩

  6. OCR is “optical character recognition” for the non-nerds. The scanner “reads” the words and figures out what they are.  ↩

  7. Props to Stephen Kertis for recommending this soundboard. For $230, it does everything I need it to do–from recording LPs to recording podcasts.  ↩

Open Letter to Kentucky Judges Regarding the Ongoing Foreclosure Crisis

by Ben Carter

Cross-posted from Ben Carter Law...

This essay is deeply indebted to two articles: "Defending Mortgage Foreclosures: Seeking a Role for Equity" by law professor David Super and a National Consumer Law Center report: "Servicer's Failure to Engage in Appropriate Loss Mitigation as a Foreclosure Defense. The NCLC article does not appear to be available online, but many other resources from the amazing National Consumer Law Center are available

Dear Judge,

I’m writing today because it is down to you. You are the last, best hope for Kentucky’s homeowners–both those facing foreclosure and their neighbors.

Our neighbors’ homes are on fire. The foreclosure crisis blazes through our neighborhoods and continues to grow. One in four Kentucky homeowners owe more on their house than it is currently worth. One in ten is more than thirty days behind on their home loan.

Foreclosure is too expensive, too extreme, to be granted as a matter of routine—each sale adds fuel to the raging fire. Foreclosure devastates homeowners, destabilizes financial institutions, degrades neighborhoods, and impoverishes communities.

Kentucky faces a situation in which homeowners facing foreclosure are clueless, powerless, and unrepresented by counsel. The federal program designed to encourage banks[1] to modify homeowners’ loans (HAMP) is a colossal failure. Reckless banks pursue foreclosure even to their own (and everyone else’s) detriment. Worse, problems with the banks’ own loan documents abound; their right to foreclose at all is deeply suspect.

The federal government first failed to adequately regulate mortgage lending. Now, it is failing to address the fallout. State and local government’s efforts to mitigate the losses have been similarly watered-down and ineffective. Frankfort lacks the political resources and local governments lack the financial resources to address a crisis of this proportion. Banks can walk all over a local government.

But, they can’t walk over you.

Kentucky, thank God, is a state that requires banks to seek judicial approval before taking a homeowner’s house. Some states don’t. I’m writing today to encourage you to apply much stricter scrutiny–both legal and equitable–on foreclosure proceedings than has traditionally been applied. I’m writing to ask you to incorporate alternative dispute resolution in your foreclosure cases that will ensure that the parties have explored in good faith every alternative to foreclosure before granting judgment in favor of foreclosing Plaintiffs. I’m writing to ask you to ensure that the foreclosures inflicted upon the community are only those that are absolutely necessary.

What is happening is not traditional; it’s extraordinary. It’s time to start treating it extraordinarily.

How We Got Here

Later in this letter, I will urge you to evaluate and question whether equity will permit the foreclosure the bank is asking you to grant. I will encourage you to aggressively apply equitable remedies in Kentucky foreclosure proceedings. To evaluate the equity of the situation, you need to know how all of these loans that are now in default came to exist in the first place.

In the past decade, the system set up by federal regulators, banks, and investors to finance home loans incentivized originating exotic, risky, and unsustainable loan products to Americans unlikely to appreciate the complex terms contained in their loan.[2] Fraud and unconscionable practices pervaded the mortgage lending landscape. Lenders qualified borrowers for unaffordable mortgages by offering initially-low interest rates that obscured the true cost of the loan. Many homebuyers never knew their house payments would increase dramatically a few years into the loan. Borrowers who were savvy enough express concern about these “teaser rates” were told not to worry about the adjustable rate, that they would refinance the homeowner into a fixed rate before the rate adjusted. Banks paid mortgage brokers a “Yield-Spread Premium”—often thousands of dollars—to place homebuyers in loans with higher interest rates than the rate for which the homeowner’s credit history and income actually qualified them.

Not surprisingly, the victims of these lending abuses were often the very people who could least afford it: poor people and minorities.[3] Often, these loans were written at 100% of loan-to-value,[4] leaving homeowners trapped and unable to refinance out of spiraling interest rates once housing prices plummeted in the wake of the subprime mortgage meltdown.

After mortgage brokers and lenders placed homeowners in risky loans, they sold the right to collect payments on those loans to investment firms who then pooled those loans with thousands of other loans. Investors—from school boards in Iowa to the government of Iceland—bought the right to be paid proceeds from the revenue the pooled loans generated. Investment firms who purchased individual mortgages and created residential mortgage-backed securities grossly underestimated the riskiness of the loans they were purchasing and credit rating agencies likewise gave the securities the safest (“triple-A”) rating that many institutional investors required.

Because this system sold not only the right to collect mortgage payments, but also the risk of a defaulting loan, it removed any incentive from the loan originator to exercise due diligence, verify income, ensure sustainability, or prevent appraisal fraud. The system of securitization designed by Wall Street investment firms rewarded lenders who could originate as many loans as quickly as possible.

As is obvious in hindsight, the incentives surrounding this entire scheme of financing loans are exactly backwards. Mortgage brokers are rewarded not for finding homeowners the most affordable loan, but the most expensive. Originating lenders have no interest in the long-term sustainability of the loan, and investment firms only care that there are investors for the securities they’re creating. Credit rating agencies are paid by the very firms that they’re grading.

Before the housing bubble, lenders and the eventual investor (usually FannieMae or Freddie Mac) cared whether an individual homeowner could pay their mortgage payment. Suddenly, no one did. It was a system for financing home loans that did everything wrong. It was destined to collapse.

Foreclosure Hurts Everyone

Now that the collapse has happened, the mortgage meltdown and the broader economic downturn have introduced into the public conscience the ravages of foreclosure on individuals and communities. No one wins when a house is sold at a foreclosure auction.[5]

Homeowners lose their home. They always lose the emotional equity they’ve invested into their home, and often any financial equity, as well. They lose the stability that homeownership provides. Their world suddenly uncertain, homeowners bear the cost of moving and reestablishing housing in another neighborhood, sometimes another city or state.

Lenders lose money along every step of a foreclosure sale. A 2008 paper by the Mortgage Bankers Association acknowledges lenders often lose in excess of $50,000 in each foreclosure, or 30–60% of the outstanding loan balance.[6]

From the moment a homeowner stops paying their mortgage, lenders lose money. While the loan is delinquent, lenders lose principle and interest payments, as well as taxes and insurance payments. They must maintain the property, if necessary, and invest in trying to collect the on the loan. Once the home is in foreclosure, lenders must hire lawyers, pay court costs, and administrative fees. Then, they then must hire a company to maintain the property and secure the property. Finally, after the home is sold in foreclosure, the lender often must restore the property before selling it and hire a realtor.[7] If the lender is lucky, the property will sell at a deeply discounted rate, if it sells at all.[8]

Beyond the parties to the contract—the homeowner and lender—foreclosure hurts innocent neighbors and plagues communities with a vicious cycle of depreciation and degradation.

Because houses sold at a foreclosure auction are eventually sold for a fraction of what they otherwise would have, foreclosures damage the value of neighboring homes. When a neighborhood’s homes begin to depreciate, many innocent homeowners find themselves “upside-down” on their own loans. That is, they suddenly owe more on their homes than they are worth.[9] When a family needs to move or refinance, they find doing so next to impossible. Even for those hoping to remain in the neighborhood, a foreclosure sale on a neighbor’s property, over which they have no control, strips them of equity and reduces the value of their investment.

This collateral damage (literally and figuratively) is exacerbated by the fact that many foreclosed properties are not properly maintained and remain vacant or abandoned for months or years.[10] Researchers in Philadelphia have determined that properties within 150 feet of an abandoned property lose $7,627 in value. Those within 300–450 feet lose $3,542. Properties on a block with an abandoned house sell for $6,715 less than those without a vacant property. Metropolitan Housing Coalition, 2009 State of Metropolitan Housing Report 16 (2009). Louisville currently has between 7000 and 8000 vacant properties—a number that has doubled in the past six years—and the roughly 250 foreclosure sales scheduled each month continue to grow the number of vacant properties. The Center for Responsible Lending anticipates that Kentucky will lose $2.2 billion in home equity due to nearby foreclosures between 2009 and 2012. That’s an average loss of $2,610 per home.

Because of foreclosure sales, deeply discounted REO properties, and the glut of vacant and abandoned properties depress property values, ordering a foreclosure sale will reduce the local government’s property tax revenues–the lifeblood of municipal budgets. Not only will it reduce the money local governments bring in, foreclosures require the government to spend up to $34,000 per foreclosure on “inspections, court actions, police and fire department efforts, potential demolition, unpaid water and sewage, and trash removal.”[11] All told, the Joint Economic Committee of the U.S. Congress estimates that each foreclosure costs all parties $80,000.[12]

Kentucky Judges Should Consider Equity and Equitable Remedies

Five hundred years ago, England developed equitable proceedings for cases in which the strict enforcement of rigid legal principles made the attainment of justice unlikely. Our own legal system, descended from the English system, requires courts to exercise both legal and equitable jurisdiction. Modern practice in Kentucky merges the two systems of law and equity. Ford v. Gilbert, 397 S.W.2d 41 (1965). The Kentucky Constitution “imbues the circuit courts with the general power to determine all matters of controversy arising under common law or equity.” Hisle v. Lexington-Fayette Urban County Government, 258 S.W.3d 422, 432 (Ky. App. 2008).

In Hisle, the Court notes that “[a]lthough modern partition proceedings generally involve statutory provisions, the jurisdiction of equity courts to partition real property is very ancient and has existed in common law both in England and this country since its founding.” Hisle at 431. Therefore, statutes that govern partition of land “supplement, or are supplemented by, the traditional jurisdiction of equity courts to decree partition.” Hisle at 432 quoting Atkinson v. Kish, 420 S.W.2d 104, 110 (Ky. 1967).

Similarly, in a foreclosure proceeding, the statutory provisions intersect with equitable considerations. Equitable relief is available in states, like Kentucky, where foreclosure is a statutory action. Union National Bank of Little Rock v. Cobbs, 509 A.2d 719, 721 (Pa.Super. 1989). “Foreclosure is peculiarly an equitable action, and the court may entertain such questions as are necessary to be determined in order that complete justice may be done.” Morgera v. Chiappardi, 813 A.2d 89, 98 (Conn. App. 2003) quoting Hartford Federal Savings & Loan Assn. v. Lenczyk, 217 A.2d 694 (1966). Emphasis in original. “The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.” LaSalle National Bank v. Freshfield Meadows, LLC., 798 A.2d 445 (Conn.,2002).

Today, Kentucky courts [13] have the ancient opportunity and duty to weigh the equities present in each foreclosure case. To evaluate the equity of the situation, the Court should ask itself two questions:

  1. Does the bank deserve the right to foreclose on this particular homeowner?
  2. Should the Court allow the bank to inflict a foreclosure on the community?

Does the Bank Deserve the Right to Foreclose on This Particular Homeowner?

As an initial matter, the court should examine the Plaintiff’s own conduct and its relationship to the homeowner. “Equitable defenses invite the court to consider only the plaintiff’s ethical standing and to deny all remedies if the plaintiff does not meet equity’s standards.” Dan B. Dobbs, Dobbs Law of Remedies § 2.3(3) at 80 (2d ed. 1993). Courts can examine the behavior of the parties over the life of the loan: from the origination of both the note and mortgage, to their validity, to their enforcement. Bank of New York v. Conway, 916 A.2d 130 (Conn. Supp. 2006).

For example, when a “mortgagor is prevented by accident, mistake or fraud, from fulfilling a condition of the mortgage, foreclosure cannot be had.” New Haven Sav. Bank v. LaPlace, 783 A.2d 1174, 1180 (Conn. App.,2001). Courts have also recognized other equitable defenses to foreclosure: unconscionability, abandonment of security, usury, accident, fraud, equitable estoppel, laches, breach of implied covenant of good faith and fair dealing, tender of deed in lieu of foreclosure, a refusal to agree to a favorable sale to a third party, and violations of state consumer protection laws. Id.

What is the Plaintiff and What Has It Done to Avoid Foreclosure?

In the context of a foreclosure on a person’s home, a constellation of considerations often undermines the Plaintiff’s equitable standing to pursue a forfeiture of that home. From the origination of home loans, to their securitization, to their servicing, and finally to the treatment of defaulting homeowners, the mortgage brokers, appraisers, realtors, banks, investment firms, and investors purposefully and profitably participated in a tremendously flawed lending system. These flaws erode the Plaintiff’s equitable standing to now insist on the drastic remedy that requires a family to forfeit their home.

Failing to consider origination abuses would encourage the kind of schemes constructed within the last decade in which each party to the loan, from origination to securitization, sought and profited from plausible deniability of such abuses. The Plaintiff in most cases will not have originated the loan. It may not have been there when the appraisal was massaged. It may not have paid the broker for placing the homeowner in a more expensive loan than was justified by the homeowner’s credit score. It may not have written risky loans to people who didn’t understand the loan’s terms. But, it intentionally chose to participate in the system by purchasing those loans from the originating lender. It sought to profit from the fraud and unconscionable actions perpetrated by mortgage brokers, realtors, appraisers, and lenders. The Plaintiff’s hands became unclean when it shook the dirty hands of the loan’s originators.

Plaintiff’s willingness to participate in a reckless lending environment fraught with fraud, unconscionable lending practices, and bad faith impacts its equitable standing to now seek the extreme remedy of foreclosure. But the inquiry into equitable standing does not end there. The Court must inquire into any servicing abuses, as well as whether and how diligently the Plaintiff has pursued other, less drastic, loss mitigation options in the face of the homeowner’s alleged default.

*When the homeowner began struggling with the mortgage payments, did the Plaintiff consider a forbearance agreement in cases of temporary hardship? *Did it offer to modify the homeowner’s interest rate as it was spiraling out of control? *Did it structure its loss mitigation and loan modification departments in ways that encouraged participation by homeowners? [14]

*Did it consider accepting a deed in lieu of foreclosure or the sale of the property to a third party? *Did the Plaintiff insist on pursuing foreclosure even while telling the homeowner it was considering him or her for a loan modification?

Failure to provide meaningful loss mitigation options to struggling homeowners damages the Plaintiff’s equitable standing to now seek a forfeiture of the Defendant’s home.

Has the Servicer Participated in HAMP in Good Faith?

The existence of a federal program that is designed to encourage services to modify struggling homeowners’ loans adds an additional layer to the Court’s analysis of the Plaintiff’s equitable standing.[15]

After creating an incredibly risky and ultimately disastrous system for financing home purchases, banks and investment firms received $700 billion of taxpayer money as part of the Troubled Asset Relief Program (TARP). As part of that program, lenders and servicers of home loans could opt in to the Home Affordable Modification Program (HAMP), allowing them to access $50 billion in taxpayer money. The federal government intended HAMP to “help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. Home Affordable Modification Program, Supplemental Directive 09–01 1 (April 6, 2009). Under HAMP, a lender or servicer receives cash payments for modifying loans in its portfolio according to the requirements of the program. Once it has opted in to the program, a lender or servicer is obliged to review all of its loans for eligibility under HAMP.

Participation in this program is optional, compliance with its regulations is not. Numerous state and federal courts have found that a lender’s violation of a federal law designed to prevent foreclosure should be raised by the borrower in state court as an equitable defense in a foreclosure proceeding, instead of as a private cause of action.[16] Similarly, state courts also have found that a lender’s non-compliance with federal FHA, HUD, or VA guidelines designed to prevent foreclosure may be raised by the borrower as an equitable defense in a foreclosure proceeding.[17]

Resolving how and whether a servicer has complied with the HAMP regulations require courts to both enforce legal rights and weigh equitable considerations. Like the facts surrounding the origination and servicing of the loan, a servicer’s compliance with HAMP will affect their equitable standing to pursue a foreclosure action.

How HAMP Works

Broadly speaking, HAMP requires the lender or servicer to ask itself, “Would modifying this loan under the terms of HAMP yield a loan that is more or less profitable than foreclosing on the property?” If modification is more profitable, the participating entity must offer the homeowner a conforming loan modification. If foreclosure is more profitable, the lender can proceed with foreclosure.[18] This analysis is called a “Net Present Value” (NPV) calculation. Many courts have held that a servicer’s failure to comply with similar loss mitigation requirements in the FHA loan program was a defense to foreclosure.

To appreciate the importance and difficulty of doing a proper NPV analysis, it is critical to understand what variables go into a Net Present Value calculation. To properly perform an NPV, banks must compare the value of the income from a foreclosure sale to the value to the investors of a modified loan. Many variables go into calculating the potential loss from a foreclosure sale. Unfortunately, the participating lenders claim their NPV models are “proprietary,” so we cannot be entirely certain what variables lenders consider. However, the FDIC provides their “Mod in a Box” calculator to the public and it provides the masses an idea of what the calculation involves.[19]

To calculate the value of the income from a foreclosure sale, the bank must consider variables like the likelihood that the homeowner will “cure” the deficiency, making foreclosure unnecessary. Further, the lender must anticipate the amount for which the property can be resold in a post-foreclosure sale, how long such a sale would take, and what costs would be involved (including maintenance, taxes, legal fees, court costs, inspections, etc.).

With so many variables to consider, participating servicers can make mistakes in their Net Present Value analyses. Sometimes, the value of the property (a consideration in its potential resale value) has declined without the servicer’s knowledge. Sometimes, the homeowner has significant defenses to the foreclosure that need to be litigated prior to foreclosure, increasing both the time and cost of foreclosure.

Without production of the NPV analyses, the court and homeowners have no way of verifying the accuracy or veracity of the foreclosing parties’ analyses. Without a court order, homeowners have no assurances that the servicer or bank has done the math properly and according to the HAMP’s requirements. This math will determine the homeowner’s fate and whether or not the homeowner will, in fact, remain a homeowner. This lack of transparency violates public policy and is especially disturbing in light of the recent economic crisis. The banks and servicers entrusted to perform the NPV analyses are the same banks whose math counseled for the origination of risky adjustable rate mortgages written at 100% loan-to-value. Their math assured investors that securitizing subprime loan products was a safe bet, that housing prices would continue to climb. That banks and servicers now expect homeowners, courts, and communities to trust them to do the math correctly behind closed doors strains credulity and demonstrates, still, the height of hubris.

To ensure participating lenders are complying with their obligation to accurately perform a Net Present Value analysis and to ensure taxpayers are getting value for their investment in the HAMP program, this Court, operating in equity, should order participating lenders to produce their NPV analyses prior to ordering a foreclosure sale. The stakes are too high for everyone—banks, homeowners, neighbors, and communities—to not get this right.

How HAMP Doesn’t Work

A homeowner is extremely lucky if the only shortcoming in the process of applying to HAMP is their bank’s failure to “show their work” on their Net Present Value analysis. So much pain exists in the process before the bank ever has the chance to do the math wrong. As has been well-documented elsewhere (LINK), servicers routinely *lose homeowners’ paperwork *ask for additional paperwork *ask for duplicative paperwork *encourage homeowners to miss a payment “in order to be eligible” for a loan modification *say one thing on the phone and another in paperwork *misapply payments *extend three-month trial modifications for 8, 10, 12, 15 months *deny modifications they had previously accepted.

Plaintiffs will characterize their actions in court—filing foreclosures and pursuing judgments and sales—as innocent and harmless steps designed to protect its legal rights. They are not. Plaintiff’s actions actually damage the homeowners’ ability to get a loan modification, contrary to the goals of HAMP, the purpose of servicers’ voluntary participation in the program, and the requirement to participate in good faith.

One of the variables banks and servicers include in their NPV analysis is the cost of successfully taking a piece of property through a foreclosure sale; these costs include legal fees and court costs. Typically, banks pass along these costs to the homeowner in a modification, adjusting the unpaid balance upwards by thousands of dollars. By increasing the unpaid balance of the loan, modifying that loan so that the monthly payment is 31% of the homeowner’s gross monthly income (a requirement under HAMP) appears less palatable. The higher those foreclosure fees (and ultimately the unpaid balance of the loan) are, the less likely a homeowner is to receive a modification.

Similarly, another variable banks estimate when deciding whether to modify a homeowner’s loan is the months to a foreclosure sale. The more months before achieving a foreclosure sale, the more expensive the foreclosure becomes and the longer it will be before the house is ultimately resold by the bank to recoup its investment. As the months to a foreclosure sale rise, modification becomes an increasingly profitable alternative under a NPV analysis. By aggressively pursuing legal claims, banks are taking affirmative actions to keep the months to a foreclosure sale low and decreasing the homeowner’s likelihood of receiving a loan modification. Thus, by pursuing foreclosure even while considering a homeowner for modification, banks and servicers are undermining the taxpayer-funded program in which they chose to participate and that program’s stated goals.

Even if the Plaintiff’s own equitable standing is impeccable, the Court’s inquiry into the equities of the case does not end there. Given taxpayers’ significant investment into this program and its goal of drastically reducing the number of foreclosures, the community has a broader equitable interest in ensuring its success.

Should the Court Allow the Bank to Inflict a Foreclosure on the Community?

While courts will inquire into the behavior of the Plaintiff and the circumstances surrounding the origination, servicing, and enforcement of the note and mortgage, a foreclosure involves broader equitable considerations. Courts not only consider strict equitable defenses, but also “balance hardships that the parties, other affected persons, and the public would face under various possible outcomes.” Handbook of Modern Equity, de Funiak, William Q., 42–46 (2d ed. 1956). Again, trial courts “may examine all relevant factors to ensure that complete justice is done.” Johnnycake Mountain Associates v. Ochs, 932 A.2d 472 (Conn. App. 2007). Here, this examination requires inquiry into the devastating impact of foreclosures on the parties and the community. Furthermore, courts must consider the hardships caused by securitized loans, as well as Plaintiff’s compliance with federal efforts to stabilize the housing market and end the foreclosure crisis.

Kentucky courts have long-recognized the doctrine of equitable waste to prevent parties from abusing their own rights to the detriment of others. The Kentucky Court of Appeals, then the Commonwealth’s highest court, held in 1912 that:

[E]quity will sometimes restrain equitable waste. Equitable waste is defined by Mr. Justice Story to consist of ‘such acts as at law would not be esteemed to be waste under the circumstances of the case, but which, in the view of a court of equity, are so esteemed from their manifest injury to the inheritance, although they are not inconsistent with the legal rights of the party committing them.’ The same author further says: ‘In all such cases the party is deemed guilty of a wanton and unconscientious abuse of his rights, ruinous to the interests of other parties.’ Lord Chancellor Campbell defines equitable waste to be ‘that which a prudent man would not do with his own property.’ Landers v. Landers, 151 S.W. 386, 391 (Ky.App. 1912). Internal citations omitted.

When operating in equity, then, courts will intervene to avert financial ruin, even if a party may be legally entitled to ruin either itself or others.

In foreclosure cases, courts should undertake a complete inventory of the cost of the foreclosure to both the parties and the larger community. “Balancing … public interest and third person rights … admits a modicum of economic analysis into the equity case.” Dobbs at § 2.4(6) at 112. When the court weighs the equities in a foreclosure proceeding, it must consider the effect a foreclosure sale will have on innocent homeowners in the neighboring area.[20]

As discussed above, lost equity, maintaining and reselling foreclosed property, lost investment, depreciation of nearby properties, and lost tax revenue add up quickly to make foreclosure an exceptionally costly remedy. Unfortunately, due to perverse incentives for servicers in Pooling and Servicing Agreements, lenders cannot be relied upon to manage their interest in the property “as a prudent man would” as required by the Court in Landry. Instead, lenders pursue foreclosure to their own detriment and the detriment of the homeowner, neighbors, and the larger community. In these cases, the court is required to consider the public interest and third party rights in an economic analysis of the equities in a foreclosure case. The high cost of foreclosure to all involved make it a remedy that should only be granted when all other options have been exhausted and other equities compel it.

Beyond the barrier posed by the servicers’ warped incentives, securitization creates another barrier to a mutually beneficial settlement. Stock, called "certificates, in residential mortgage-backed securities are divided into tranches; investors in various tranches can have very different financial incentives. Investors in a RMBS receive different returns on their investment and receive payment in different orders of seniority. So, even when these notes were effectively securitized, the certificateholders of the security have very different interests. Some (those with the most seniority) will prefer pursuing foreclosure, while investors in more junior tranches will profit by a mortgage reformation. In this situation, many servicers will decline to act to modify a home loan, citing either the constraints of the Pooling and Servicing Agreement or exposure to potential liability to one investor or another.

This situation is inequitable. Foreclosures devastate homeowners, neighborhoods, and communities while servicers and their investors fail to pursue alternatives to foreclosure. Kentucky courts, operating in equity, should require both parties to a note secured by real estate to negotiate in good faith before pursuing the drastic and costly remedy of forfeiture through a foreclosure sale.

When a homeowner has applied for a HAMP modification, the securitization of the homeowners loan can prevent modification. Under HAMP, if a loan has been securitized (and 85% of outstanding home loans have), the servicer must get approval from the trustee of the residential mortgage-backed security–approval the investor is not obligated to give. Many homeowners go through months of heartache and hassle trying to get their loan modified only to be told, simply, “the investor is not participating.” When this occurs, Courts must be deeply skeptical of the Plaintiff’s equitable standing to pursue foreclosure. If a servicer has asked an investor’s permission to modify a loan, it’s because the servicer has already calculated that EVERYONE, including the investors, will lose less money modifying a homeowner’s loan than by foreclosing on the home. The investor’s non-participation in this situation is profoundly inequitable.

Kentucky courts already recognize that when the state seeks to condemn property under its power of eminent domain cases that the condemning authority has the “additional duty … to negotiate in good faith for the acquisition of property prior to initiating condemnation proceedings.” Golden Foods, LLC v. Louisville & Jefferson County Metropolitan Sewer Dist., 2005 WL 1049388, 3 (Ky. App., 2005). The two situations—eminent domain and foreclosure—are similar. Both involve parties with radically different levels of bargaining power. Both involve the forfeiture of real estate to the party of greater power. In foreclosure suits, courts should exercise their equitable jurisdiction and withhold foreclosure until the party seeking to foreclose can offer convincing evidence of having negotiated in good faith and can demonstrate that no other alternative to foreclosure exists.

Remedies Available in Equity

Sitting in equity, the Court has broad discretion to fashion a remedy that does justice in a particular case. It can refuse to grant a foreclosure sale: “[w]here the Plaintiff’s conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles.” Morgera v. Chiappardi, 813 A.2d 89, 91 (Conn. App. 2003).[21] In cases in which the alleged delinquency is caused by unemployment, disability, or other loss of income, the Court may stay a foreclosure to provide the Defendant time to find employment, apply for benefits, or otherwise remedy the loss of income. When a homeowner has applied for a loan modification, the Court may dismiss premature suits for foreclosure when the Plaintiff has not finished evaluating that homeowner for a loan modification. Similarly, the Court may stay a foreclosure proceeding until a servicer or bank gives convincing evidence of having negotiated in good faith with a homeowner. Negotiating in good faith will include exploring less-costly alternatives to foreclosure like short sales, deeds-in-lieu of foreclosure, reasonable payment plans to erase the arrearage. Courts may modify mortgage payments as required by the demands of equity.[22]

A bank’s failure to explore all options to avoid inflicting a foreclosure will impact their standing to pursue a foreclosure. Courts do not need to wait on homeowners attorneys to make these arguments or question the bank’s equitable standing. As a judge in Kentucky, you can inquire sua sponte into the parties’ standing, as standing impacts the court’s subject matter jurisdiction. Kentucky Employers Mutual Insurance v. Coleman, 236 S.W.3d 9, 15 (2007). If a bank is behaving recklessly, the Court may dismiss the case for lack of subject matter jurisdiction because the bank’s bad acts rob it of the equitable standing it needs to pursue foreclosure in our courts.

Alternative Dispute Resolution in Foreclosure Cases

Courts across the country are changing their judicial processes to ensure that the parties have exhausted all alternatives to foreclosure, bargained in good faith, and deserve to proceed with a foreclosure sale.

Right now, we have a situation in which clueless homeowners lack information about the civil process and the resources available in the community to assist them in responding to the complaint and exploring alternatives to foreclosure. More than 80% of all homeowners facing foreclosure will lack the benefit of legal counsel. In an adversarial system of justice, this virtually guarantees that the homeowner will be steamrolled in a proceeding in which our system of justice has broken down.

The failure of our system to efficiently assist clueless homeowners in finding legal counsel should concern each member of the bar. Combine vulnerable homeowners with a failed federal loan modification program and lack of legal counsel and you have a situation that is most easily defined simply as “pain.”

If timely information delivered credibly is combined with the counsel and advocacy of an attorney and a judicial program with teeth, we can enter world that involves less pain, that avoids unnecessary foreclosures, and helps our community recover from the housing crisis as quickly as possible.

The first thing we did in Jefferson County (and, frankly, the most important thing you can do) is attach a Notice to each foreclosure complaint before the Sheriff delivers the complaint and service of summons. The Notice should be full-color (or a least printed on colored paper) and should contain a phone number homeowners can call to receive a referral to an attorney or housing counselor.

You will need to work with your local bar association and legal aid offices to develop a referral system that works for your jurisdiction.

National best practices for these foreclosure mediation programs are emerging and include:

  1. An automatic stay of the foreclosure proceedings until the servicer has established its good faith compliance with its obligations
  2. Transparency from all parties that includes production of net present value calculations and loan documents
  3. Active, neutral oversight from an official with the power to impose sanctions on parties
  4. Requirement to pursue alternatives to foreclosure in good faith
  5. Sustainable funding mechanisms that allow program administrators to be paid
  6. Oversight of attorney’s fees and foreclosure costs

The Franklin County Circuit Court has implemented a program that incorporates many of the emerging national best practices. A copy of the Court’s order is available here.

In Franklin County, the Court issues an automatic stay in every foreclosure case. If the homeowner takes no action within 20 days, that stay is lifted. However if the homeowner is participating in Franklin County’s foreclosure mediation process, the stay will remain in place until the parties agree on an alternative to foreclosure or the servicer can demonstrate that they have analyzed and pursued every other alternative to foreclosure and they are both legally and equitably entitled to the extreme remedy of foreclosure. A mediator oversees this entire process and can report to the Court regarding the efforts both sides are making to avoid a foreclosure.

It’s Down to You

The foreclosure crisis rages across our state. Banks add fuel to the fire with each foreclosure they pursue. with each foreclosure sale, surrounding homes lose value.[23] Despite profiting from their subprime lending spree, the TARP bailout, and the Home Affordable Modification Program, banks are actively seeking to foreclose, adding unnecessary costs to the loan and diminishing homeowners’ chances to qualify for loan modifications. Banks chose to play with fire in the risk-filled world of residential mortgage-backed securities; they now expect the Court to stand aside and watch as our neighborhoods burn.

The Court does not have to stand aside. Rather, the Court has the obligation to weigh the equities in each foreclosure case and decide whether the Plaintiff has the legal and equitable standing to impose the costs of foreclosure on innocent neighbors and the city’s strained coffers. You have the authority to evaluate the equity of the situation and craft equitable solutions unique to each case. Or, you have the authority to order a mediation at which each alternative to foreclosure will be considered and eliminated prior to allowing the Plaintiff the extreme remedy of foreclosure.

Federal and state officials have failed to adopt policies that would reduce the foreclosure crisis and the unemployment crisis. It’s down to you.

It’s up to you.

  1. Throughout this letter, I will use the word “bank” and “servicer” interchangeably. There is a difference. But, when I’m referring to a “bank” pursuing foreclosure, I mean “the entity charged with servicing the loan and exploring loss mitigation options.” This will often, in fact, be a servicer. About 85% of all home loans have been bundled into residential mortgage-backed securities; those lines are usually managed by a “servicer,” not a “bank.” That servicer would often be the entity responsible for collecting and accounting for payments, determining default, initiating and prosecuting the foreclosure, and exploring alternatives to foreclosure.  ↩

  2. For a general overview of the risks of adjustable rate, interest-only, and payment-option mortgages, see Mark Zandi, Financial Shock: A 360° Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis 35–38 (FT Press 2009). Zandi reports that the lending industry regarded payments scheduled to “rise substantially” as “a problem for another day.” He also notes that because ARMs “shift substantial risk to borrowers when rates fluctuate…the delinquency rate on ARM loans is 50% greater than on fixed-rate loans.”  ↩

  3. While some unqualified borrowers received loans, other borrowers received high-cost loans when the borrower’s income and credit history qualified them for more traditional, affordable loans. The National Community Reinvestment Coalition issued a report, “Income is No Shield” in 2008 describing in detail the disparate impact the lending environment had on minorities, regardless of income or credit score. In Louisville, specifically, the report found that low-to-middle income African-Americans were 2.3 times more likely to receive a high-cost home loan than their low-to-middle income white counterparts. Even middle-to-upper income African-Americans were 1.3 times more likely to receive high-cost home loans than their white counterparts. Again, this report is adjusted for traditional lending risk factors such as income and credit score and reflects the likelihood of receiving high-cost (and therefore high-risk) loan products by race. The report suggests that, reprehensibly, in recent years lending institutions have regarded race as a risk factor when originating loans.  ↩

  4. Often the true loan-to-value was even greater than 100% when one considers that many of the loans were justified based on inflated appraisals.  ↩

  5. To say that “no one wins” is not entirely accurate when a loan is serviced by a company that is not the owner of the note. A third party often services the loan when the loan has been securitized into a REMIC (Real Estate Mortgage Investment Conduit). In these cases, the trust will hire a third party to collect payments from the thousands of loans pooled in the security and divide the proceeds according to various investors’ rights under the Pooling and Servicing Agreement (PSA). In many PSAs, the loan servicer is paid a nominal fee for collecting the monthly checks, but gets to keep the proceeds of fees that flow from a homeowner’s default and resulting foreclosure. Thus, PSAs create in servicers the perverse financial incentive to foreclose even when both their investors and the homeowner would benefit from a negotiated settlement or loan modification that kept the homeowner in the home and monthly checks flowing to the investor. Many of the provisions of the President’s Home Affordable Modification Program aim to overcome these misaligned incentives.  ↩

  6. Mortgage Bankers Ass’n, “Lenders’ Cost of Foreclosure” p. 2 (May 2008), available at .  ↩

  7. Id. at 4–5 (May 2008).  ↩

  8. It is worth noting that the MBA acknowledged in 2008 that the current “softness” of the housing market could push the losses investors experience in an REO sale “even higher.” Since that statement, the housing market has not stabilized and remains soft.  ↩

  9. In 2008, “ten million American homeowners, a fifth of all mortgage holders, are now in this untenable financial situation.” Mark Zandi, Financial Shock: A 360° Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis 44 (FT Press 2009). In Kentucky, 1 in 4 homeowners are underwater.  ↩

  10. Another report from the Metropolitan Housing Coalition notes that “[T]he best defense to a home becoming vacant and abandoned due to foreclosure is quick action by the homeowner to seek assistance from a reliable nonprofit housing counseling program in seeking a loan modification from the creditor. The chance of a property becoming vacant and abandoned is greatly diminished by the owner negotiating new loan arrangements and remaining in the home as long as possible.” Metropolitan Housing Coalition, *Vacant Properties: A Tool to Turn Neighborhood Liabilities into Assets*. Plaintiff’s are far less likely to be guilty of equitable waste if they engage in rigorous good-faith negotiations with homeowners in default.  ↩

  11. David Newton, “Widespread Panic: Why the Mortgage Lending Industry Can Calm Down About Amending Cramdown” 98 Ky. L.J. 155, 159 (2009) quoting NeighborWorks America, Foreclosure Statistics, .  ↩

  12. U.S. Congress, Senate Joint Economic Committee, Sheltering Neighborhoods from the Subprime Foreclosure Storm, Special report by the Joint Economic Committee, 1, 110th Cong., 1st sess. (Washington: GPO 2007) available for download at  ↩

  13. Master Commissioners may also consider arguments based in equity. CR 53.04 notes that courts may “specify or limit [a commissioner’s] powers and may direct [the commissioner] to report only upon particular issues or to do or perform particular acts.” However, the rule is clear that absent such limitations, the commissioner “has and shall exercise the power…to do all acts and take all measures necessary or proper for the efficient performance of his duties.” Without a referral that specifically directs the commissioner to consider only issues of law, the commissioner has the duty to consider issues of equity, as well.  ↩

  14. Consider, for example, the successful loss mitigation efforts of Shiela Bair and the FDIC in their administration of the failed California bank, IndyMac. The FDIC created a loss mitigation program that automatically qualified homeowners for a loan modification rather than placing onerous, opaque, and frustrating requirements on the borrower.  ↩

  15. All of the servicer’s obligations under the Home Affordable Modification Program are outlined in the Handbook for Servicer’s of Non-GSE Mortgages.  ↩

  16. Lillard v. Farm Credit Services of Mid-America, ACA, 831 S.W.2d 626 (Ky. Ct. App. 1992). See also, e.g., Farm Credit Bank of Spokane v. Debuf, 757 F.Supp. 1106 (D. Mont. 1990); Federal Land Bank of St. Paul v. Overboe, 404 N.W.2d 445 (N.D. 1987); Burgmeier v. Farm Credit Bank of St. Paul, 499 N.W.2d 43 (Minn. App. 1993); Western Farm Credit Bank v. Pratt, 860 P.2d 376 (Utah Ct. App. 1993).  ↩

  17. See, e.g., Williams v. Nat’l Sch. Of Health Tech., Inc., 836 F.Supp. 273, 283 (E.D. Pa. 1993), aff’d, 37 F.3d 1491 (3d Cir. 1994); Fed. Nat’l Mortg. Ass’n v. Moore, 609 F.Supp. 194, 196 (N.D. Ill. 1985); Wells Fargo Home Mortg., Inc. v. Neal, 922 A.2d 538 (Md. 2007); Union National Bank of Little Rock v. Cobbs, 567 A.2d 719 (Pa. Super. Ct. 1989); Fleet Real Estate Funding Corp. v. Smith, 530 A.2d 919 (Pa. Super. Ct. 1987); Hayes v. M & T Mortg. Corp., 906 N.E.2d 638 (Ill. App. Ct. 2009); Countrywide Home Loans, Inc. v. Wilkerson, 2004 WL 539983 (N.D. Ill.); ABN AMRO Mortg. Group, Inc., 2009 WL 1066511 (Iowa Ct. App.); Ghervescu v. Wells Fargo Home Mortg., 2008 WL 660248 (Cal. Ct. App.).  ↩

  18. There will be instances in which even when the NPV calculation demonstrates that foreclosure is more profitable that equity will demand some alternative other than foreclosure. Under HAMP, homeowners who have significant equity in their homes will be the least likely to qualify for a loan modification. The cruel irony of the program is that homeowners who have invested most in their homes and made payments most regularly and over the longest period of time will be the most likely to lose their homes because lenders are more likely to recoup the full Note value of the loan in foreclosure. Equity will require some solution other than foreclosure in these cases.  ↩

  19. Maine has established the FDIC’s program as the NPV analysis standard at court-ordered mediations. “Mediations conducted pursuant to the program must use the calculations, assumptions and forms that are established by the Federal Deposit Insurance Corporation and published in the Federal Deposit Insurance Corporation Loan Modification Program Guide as set out on the Federal Deposit Insurance Corporation’s publicly accessible website.” 14 M.R.S.A. § 6321-A . An overview of the program and how the Excel spreadsheet operates is available here. The Net Present Value test is available as an Excel spreadsheet.  ↩

  20. This abandonment of property becomes even more inequitable when one considers the bank’s active contribution to neighborhood disintegration. Judge Boyko notes that while “financial institutions or successors/assignees rush to foreclose [and] obtain a default judgment,” the bank will then “sit on the deed, avoiding responsibility for maintaining the property while reaping the financial benefits of interest running on a judgment. The financial institutions know the law charges the one with title (still the homeowner) with maintaining the property.”  ↩

  21. See also Bank of New York v. Conway, 916 A.2d 130 (Conn. Supp. 2006).  ↩

  22. In times of economic crisis, the state has the power to alter the terms of contracts between private parties to protect the vital public interests. “The reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all contracts as is the reservation of state power to protect the public interest in the other situations to which we have referred. And, if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood, or earthquake, that power cannot be said to be nonexistent when the urgent public need demanding such relief is produced by other and economic causes.” Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 439–40 (1934).  ↩

  23. The Center for Responsible Lending [estimates] that over 800,000 Kentucky homes will lose an average of $1,800 in equity due to nearby foreclosures between 2009 and 2012. That’s $2.2 billion in lost equity statewide.  ↩

A Few Words for Addison Parker

by Ben Carter in

Because we don’t say enough about people who matter to us, because we don’t celebrate people who live principled lives, because we should praise people like Addison Parker, I’m posting the letter I wrote to support Addison’s nomination for the Kentucky Justice Association’s Consumer Safety Award. The Kentucky Justice Association honored Addison last week with the award. I missed it, but I am told that J.T. Gilbert did a bang-up job describing the importance of Addison’s career to Kentucky consumers.

Dear Chairman Gilbert and the KJA Awards Committee,

I’m writing today to nominate Addison Parker for the Kentucky Consumer Safety Award. Earlier this summer, Addison retired after decades of service to Kentucky’s consumers as an attorney at the Appalachian Research and Defense Fund (AppalReD). During his time at AppleReD, Addison served Kentucky’s most vulnerable citizens at their most vulnerable moments.

I know that the private bar does not always know what is going on with their brothers and sisters in the legal services community; you may not know, for example, that his legal services colleagues from across the state regard Addison as a titan of consumer law. Practicing in all corners of consumer law, Addison assisted debtors in filing Chapter 7 and Chapter 13 bankruptcies, mobile home owners facing abuse, tenants facing eviction, and homeowners facing foreclosure. He has successfully battled zombie debt collectors, tax lien purchasers, and unscrupulous payday lenders. With bold and creative advocacy forged by a combination of hard work, meticulous attention to statutory and jurisprudential detail, and an unrelenting passion for his clients and his causes, Addison has upheld and expanded the rights of consumers across Kentucky.

When we think of “consumer safety”, most of us think first about seatbelts, airbags, salmonella, and flammable pajamas. If we have learned anything from this last decade, it must be that the negligently designed financial products offered to American consumers can cause just as much (if not more) harm to Kentucky families and our community’s well-being than a negligently designed physical product. Addison recognized this principle decades ago and began battling the powerful banks and financiers who seek to profit through recklessness and fraud long before the present meltdown.

While Addison’s laser-like devotion to protecting Kentucky consumers is admirable standing on its own, Addison’s commitment to mentoring and assisting other attorneys makes his contribution to Kentucky’s legal community truly remarkable. Three years ago, I began defending homeowners facing foreclosure at the Legal Aid Society in Louisville. I could not have been more clueless about how to help someone facing foreclosure. I soon met Addison because he chaired the Kentucky Consumer Law Working Group, which meets quarterly to discuss new developments in Kentucky consumer law. Afterwards, Addison generously spent hours on the phone with me discussing case strategy, explaining the nuances of complicated federal statutes like the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (HOEPA), and the Home Ownership Equity and Protection Act (HOEPA). Addison traveled around the state to co-counsel cases with public and private attorneys. He provided trainings to any group willing to listen, whether it was the Kentucky Bankers Association or the Kentucky Equal Justice Center.

Unfortunately, clients of legal services organizations often expect that they won’t get a good attorney because they couldn’t afford to pay an attorney. Many of Addison’s clients came to understand that not only did they get a good attorney, they got the best attorney. An attorney that money couldn’t buy—and I mean that literally. Over his career, Addison passed up numerous, more lucrative opportunities to become a law professor, to become in-house counsel at the National Consumer Law Center, to pursue private practice, and to work in other legal services organizations. His devotion to Kentucky and its most vulnerable citizens is as deep as his contributions to them are numerous. I can think of no better or more appropriate way to honor Addison’s career-long commitment to Kentucky than by honoring him with the Kentucky Consumer Safety Award.


Ben Carter