Recent stories on American Public Media's Marketplace and in the New York Times highlight the empirical scholarship of Katie Porter of the University of Iowa Law School and Tara Twomey, a Lecturer at Stanford Law School. The two have been conducting a study, described here, of mortgage claims in Chapter 13 bankruptcy proceedings. Given the current mortgage crisis, this work has important and immediate real-world implications.
The study, which involved a sample of more than 1000 Chapter 13 bankruptcy filings, found that there were substantial questionable fees charged by mortgage holders. From the New York Times article:
In an analysis of foreclosures in Chapter 13 bankruptcy, the program intended to help troubled borrowers save their homes, Ms. Porter found that questionable fees had been added to almost half of the loans she examined, and many of the charges were identified only vaguely. Most of the fees were less than $200 each, but collectively they could raise millions of dollars for loan servicers at a time when the other side of the business, mortgage origination, has faltered.
Additionally, the study determined that in about 70 percent of the cases they reviewed, the creditor claimed that the debtor owed more than the debtor thought he or she owed.
This kind of scholarship is, in my view, a particularly exciting example of how empirical legal scholarship can illuminate important matters about how the judicial system actually operates. And in the current economic climate, this particular study may provide valuable information to regulators, bankruptcy judges, and bankruptcy lawyers alike.