A Bill in California Will Establish That Lawyers Cannot Be Trusted
What do you call 500 lawyers at the bottom of the ocean? A good start.
Very funny stuff, right? Unless, of course, you’re being sued… or you’re charged with a crime… or you’ve just been fired without cause… or if your spouse just walked out after 20 years… or if you’ve been cited for Driving Under the Influence… or harmed as a result of another’s gross negligence. When you need an attorney to enforce or otherwise protect your rights, you’re not laughing at lawyer jokes nearly as much. In fact attorneys, I would imagine, get hugged a lot too… maybe just as often as they’re made fun of, I don’t really know.
From its very beginning, American society has been based on law… and forged by lawyers. Our lawyers have been charged with setting our nation’s values—through the “landmark cases” that brought major reforms, and through the trust in a lawyer’s day-to-day dealing with his or her clients. In point of fact, our lawyers must be the conscience of our legal system, and of the people—because if not them, who?
It occurs to me that there are certain professions that we need to trust in our society, and attorneys are one of them. Police officers are another and physicians a third. Police brutality, for example, is seen as being the very serious offense that it is, not solely because of its victims, but because it threatens to teach a segment of society that the police cannot be trusted. And that can be a very dangerous thing.
Police officers, for the most part, are looking out for our safety and if we don’t trust them, it’s quite possible that we could be harmed as a result, perhaps fatally harmed. And physicians are another group of professionals that in general we need to trust, because if we don’t, we put our health at risk.
Attorneys are a profession that we need to trust when we need them. We trust that what we tell our lawyer is “privileged,” meaning that our lawyer is prohibited from disclosing whatever we’ve said to others. And it’s important that we trust this to be the case, because if we can’t tell our lawyer the truth, he or she may not be able to provide us with a proper defense and we may be deprived of life, liberty, or property as a result.
Yet, here in California, the legislature is dangerously close to passing a bill that would establish quite clearly that lawyers… all lawyers… are individuals not to be trusted. And even more so, that attorneys in large number are the type of criminals that left unchecked would plot to steal $3,000 from homeowners distressed as a result of being at risk of losing their homes.
The bill in question, California Senate Bill 94, which was proposed by Banking & Finance Committee Chair, Senator Ron Calderon, was originally designed to prevent a company or individual from charging an upfront fee when offering to help a homeowner avoid foreclosure by working with his or her lender or servicer to obtain an agreement to modify the terms of his or her mortgage.
Now widely referred to as “loan modifications,” there is little question that few homeowners knew of such terminology just a few years ago. But as the foreclosure crisis steadily tightened its grip on California homeowners over the last 18 months, the term loan modification has quickly become a part of the lexicon.
Initially, many who had been employed in the mortgage industry prior to its meltdown, seeing it as a variation of a refinance transaction, entered the completely unregulated field, and predictably problems ensued. And although neither the precise cause, nor the extent of these problems has been ascertained, there is no question that some percentage of the operators of these early loan modification companies were unscrupulous con artists who defrauded homeowners out of several thousand dollars by promising to save their homes from foreclosure.
How many scams took place? No one is certain, but any number is too many according to some.
The State of California’s response was less than coordinated. The Attorney General and Department of Corporations was one possibility for regulation and enforcement, the California Department of Real Estate was another, and when law firms entered the picture, the California Bar Association was a third.
The initial front-runner was the Department of Real Estate, who introduced their “Advance Fee Agreement,” beginning in October of 2008. The idea was simply to allow licensed individuals to accept a fee in advance, but required that fee to be placed in a trust account and only withdrawn as earned. Months later, the Attorney General introduced the requirement that individuals post a $100,000 bond in order to operate as a foreclosure consultant.
Law firms, however, who were already well regulated and under the jurisdiction of the California Bar, remained law firms and presumably functioned as such.
Then, beginning in late 2008 and into early 2009, the California Bar started to receive an inordinate number of complaints each month, between 900-1100, and the sheer number in addition to the allegations was troubling to say the least. It seemed that some attorneys were allowing firms to operate under their license to practice law, but no law was actually being practiced at the organization in question. Mortgage brokers had realized that one way around the DRE’s Advance Fee Agreement, which limited the cash flow a company could utilize, was to become an “attorney backed firm,” a hybrid with no basis in law or business convention.
The California Bar sent out an Ethics Alert in February of 2009, warning attorneys that the Bar Association did not condone such practices, and that any attorney involved in such a scheme could be at risk of losing their license to practice law. The Bar faced a significant problem with the volume of complaints, however. An attorney had to read each complaint to determine what type of allegation each contained and having never before received anywhere the number being received, they were dramatically understaffed.
Then in February of 2009, Senator Calderon introduced SB 94 and the committee meetings began. The bill passed through the Senate Banking and Judicial Committees in May and Senate Appropriations in early June. The bill as written at that time would prohibit mortgage and real estate licensed individuals from accepting advance fees in connection with a loan modification, but attorneys were largely exempt.
Then, just days before July 4th, with the California Assembly’s Committee on Banking and Finance scheduled to hold a hearing on a similar bill (AB 764) on July 6th, the bill was amended to ban attorneys from accepting any fees or retainers in advance when representing a client in connection with a loan modification.
The negotiations to obtain a loan modification were widely believed to be 3-4 weeks… but in truth often required 5-9 months, and as a result, the effective outcome of SB 94 and/or AB 764 would be that no attorneys could afford to take on a client who was seeking representation in the negotiations with their lender. And this would effectively deprive California’s homeowners from being able to engage legal representation.
Attorneys who defend the most unpopular accused persons are especially important. The more heinous or unpopular the offense, the more necessary the right to counsel, and one of the hazards of pre-trial publicity is that the jury pool can become “tainted”. Newspaper articles, talk shows, the many opinionated programs on cable television can all serve to poison the public against a defendant… and in this case the defendant is the legal profession, access to which is now crucial to hundreds of thousands of homeowners if they are to remain in their home.
One of the most misunderstood phrases in literature is from Shakespeare. Shakespeare’s exact line, ”The first thing we do, let’s kill all the lawyers,” was stated by Dick the Butcher in ”Henry VI, Part II”. Dick was a follower of the rebel Jack Cade who thought that if he disturbed law and order, he could become king.
Shakespeare meant it as a compliment to attorneys and judges who instill justice in society.
To pass into law a piece of legislation that so clearly, thoroughly and seriously maligns the legal profession, based on allegation and innuendo would cause our society harm that could conceivably last for generations. To believe that attorneys in large number are defrauding distressed homeowners out of $3,000 fees for work that can take many months to complete, stretches the imagination past the point of credulity.
Most notably, CNNMoney.com recently asked homeowners who attempted to obtain a loan modification through the HAMP program WITHOUT ASSISTANCE OF ANY KIND to write in and share their experiences. Well over 500 letters were received and the overwhelming number expressed intense feelings of extreme dissatisfaction and disappointment.
Additionally, in the last two weeks, we have all learned that banks and servicers have not fulfilled their promises to modify mortgages per the agreed to terms of HAMP, much to the administration’s chagrin. Treasury Secretary Geithner and President Obama have both admitted the program has not worked effectively and now promise tighter controls.
A review of the complaints received by CNN.com clearly shows that those losing their homes and unable to obtain the help promised by the administration are crestfallen and angry at the failure of their government.
To effectively brand attorneys as untrustworthy thieves and scammers, based on complaints that to this date remain unread, in light of the recent evidence and testimony in Congress, would be unconscionable and result in irreparable harm to California’s homeowners and potentially all Americans who need access to legal representation today, perhaps more than ever before in our nation’s history.
I urge you to speak out immediately against this poorly conceived legislative proposal that would effectively deprive homeowners in California from their right to counsel and damage the reputations of attorneys throughout the nation.
The answer is enforcement of existing laws, not new legislation that will make it illegal for reputable attorneys to charge reasonable fees to clients who wish to engage their services. Because homeowners need help.
IF YOU’RE WILLING TO STAND UP AND BE COUNTED,
PLEASE EMAIL ME RIGHT AWAY AT:
MANDELMAN@MAC.COM
And please forward a link to this article to everyone you know.
This threat is very, very real.
