Matthew Hirsch
The Recorder
March 18, 2008

Andrew Ross' client is in a bit of a jam.

The Walnut Creek, Calif., divorce lawyer represents a man whose wife wants to keep the family home. But because of the tight consumer credit market, she can't get enough cash to buy his client's piece of the property.

To facilitate a settlement, Ross said his client is thinking about helping his wife secure a new loan on the house. "He needs $200,000 to $300,000 to make it an equal division of property," he said.

A haven for mortgage brokers and McMansions, California's Contra Costa County has been hit especially hard by the U.S. housing slump and the credit crunch.

The weakening economy, in turn, has some lawyers and judges in divorce cases grappling with issues they haven't seen in years, if ever. And it's affecting families at all income levels.

"It seems to me that a lot of people have been using their house as a bank," said Barry Goode, a family court judge in Contra Costa County Superior Court.

That was fine when prices were increasing, Goode said. But with prices sliding downward, the judge said he hears about home foreclosures "if not every day, then certainly every week."

Some lawyers are asking the court to take judicial notice of the softening real estate market, said Jeffrey Huffaker, a superior court commissioner.

One way he's responding to the weakening economy: He's become more inclined to force the sale of family property before trial in a divorce case.

Traditionally, Huffaker said, he would deny those motions "out of hand." In trial, Huffaker said he can get a broader picture of the family situation and craft a better plan to dissolve the marriage.

But lately, Huffaker said, he has seen more parties come to court saying they face foreclosure and the prospect of losing all equity in their homes if they don't sell fast.

Without keeping count, Huffaker estimates that cases where the parties stipulate to sell family property before judgment have "probably quadrupled," and that he is granting twice as many motions to force the sale of family property when the parties can't agree.

Walnut Creek neutral Lee Pearce said he is seeing more people in private mediation who want to maintain the family home as a joint investment, hoping to hold out until the market recovers so the parties can sell later and split a larger profit.

Pearce said he has also seen several cases involving mortgage brokers whose annual income has plummeted, leaving them with less money for child support.

"I haven't seen a real industry hit like this since the dot-com [collapse], where all of the geeks and the computer specialists were all out of work," he said.

Judges and divorce lawyers say they have seen real estate lose value throughout Contra Costa County. But many say less affluent communities in the eastern part of the county, like Pittsburg and Antioch, have been hardest hit by the housing slump.

David Lederman, whose main office is in Antioch, said that in the last year he has begun representing more clients whose debt outweighs their assets.

During that time, Lederman said, more prospective clients have asked for consultations instead of asking to retain him on the spot. Lederman said he bills $325 an hour.

For clients who can't afford full representation, Lederman said, he offers help with legal writing and litigation advice. The pay-as-you-go option is known as unbundled services.

"You need to find other ways to deal with the new economy, [and] you've got to do it in a manner that's not going to drive you into bankruptcy," said Lederman, president of the family law section of the Contra Costa County Bar Association.

In this real estate market, legal bills can present an issue even for more affluent clients.

Ross, the Walnut Creek lawyer whose client's wife wants to keep the family home, bills $450 an hour. "I'm pushing him to settle, because the real problem is they can't afford to continue to litigate."