A San Diego Attorney Speaks Out on How SB 94 Has Taken Legitimate Lawyers Away from Homeowners

I think it’s fair to say that I’ve written more on the subject of lawyers and loan modifications than anyone else… I’m not bragging, in fact I wish it had never been necessary for me or anyone else to write about the topic in the first place.  The question of whether a homeowner at risk of foreclosure and who is seeking a loan modification should be able to hire a lawyer to represent them, if that’s what they want to do, should never have been a question.  It just shouldn’t have ever been all that complicated an issue, in my mind anyway.

A few years back, I was teaching 5-6th grade US History/Social Studies at a nearby elementary school and I’m quite sure that if I would have asked my students who they should call if they needed help when at risk of losing a home, they would have all picked “lawyer” off of the list of options.  And, as to whether lawyers do a better job getting loans modified than homeowners on their own, the answer is also yes, no question about it.  That doesn’t mean that a given homeowner can’t get their mortgage modified without being represented by an attorney, some can and some do.  But overall, the vast majority of the hundreds of homeowners that contact me for one reason or another each month, all have similar stories… they’ve been tryingon their own to get their bank to modify their loan for a year or more and to no avail.  They hire an attorney to represent them and lo and behold, in almost every instance, their loans get modified.

Moat recently, there was a woman who called me days before Christmas with Bank of America having already turned her down for a loan modification and set a sale date of January 7th.  I referred her to a lawyer I know well, and two days before New Years her loan was permanently modified.  Would that have happened without an attorney… no, it would not.

Another couple from Northern California also comes to mind.  They had been trying to get Chase to modify their loan for over a year.  Chase was talking to them but it was going nowhere and they were scared that they could lose their home of 20 years.  Again, I referred them to a law firm I’ve gotten to know well, and a few months later, they not only got a modification, but a great modification, in my view, including a principal forbearance of $200,000.  Do I think that would have happened without a lawyer involved… not a chance in the world.

I’ve simply seen too many similar stories over the last couple of years for just anyone to tell me I’m wrong about this, but if anyone has any data that says otherwise, I’m certainly open to taking a look or hearing about someone else’s experience if different than my own.

The issue has been muddied ever since President Obama, Treasury Secretary Geithner, and Attorney General Holder, all told the nation in so many words that, “loan modifications are free… you don’t need a lawyer, you just call a HUD counselor or your bank directly.”  I was shocked when I heard that message coming from Washington D.C. because it never made any sense at all to me… because nothing that comes from a bank is ever free.

And the idea that a homeowner calling a HUD counselor or their bank directly would be as effective as paying a private sector attorney to handle things just never seemed likely to me.  And I don’t think it was much of a mystery to many homeowners either.

To the California State Bar, however, I think it would be fair to say that the whole subject of attorneys being involved in loan modifications has been hard to understand.  And much of the reason for this apparent difficulty, is that there have been far too many scams out there from which homeowners can far too easily choose.

It’s astounding, actually.  I mean, I realize that our state and federal governments have limited resources when it comes to enforcing the law in certain areas, but my God… I have to believe that if drug dealers had Websites, wouldn’t law enforcement have moved in to shut them down faster than it has taken to go after the innumerable scams that have proliferated around the Internet claiming to be able to save someone’s home from foreclosure?  Maybe I’m wrong, maybe the response would be about the same if it were drug dealers… but would it really?

To make matters worse, there have unquestionably been many firms that opened with the best of intentions only to discover that the banks were on a mission to make their lives miserable and their jobs next to impossible.  I can’t mention any names, but I happen to know of one loan modification company that was opened by a retired banker… and not just any banker, but a senior level banking executive that ran an entire region of the country for one of the largest banks in the U.S.  He came out of retirement to open a company that helped homeowners get loans modified.  Why? Because he knew what he was doing, obviously, that’s why.  But, today… his company could easily find itself branded a scammer for accepting a fee in advance of getting a loan modified.

I think there were a lot of companies, in other words, that tried and failed when it came to loan modifications, and with our government’s only advice being call HUD or your bank directly, it was left to homeowners to figure out where real help could be found and who might be in business tomorrow.

Then you had the “salesperson effect”.  Salespeople working on commission who told a homeowner with monthly income of $2,000 that they could expect to keep their home even though their first mortgage was $475,000, and their current payment with which they were struggling was interest only.  Again, I don’t think there should be any question that government could have done a lot to prevent that sort of thing from happening as well.  They just didn’t.  They rolled out a loan modification program, called Making Home Affordable, that sounded wonderful, but they failed to enforce its rules, and allowed servicers to do as they pleased… and the litigation won’t end for years to come as a result… not that it should.

What the banks have done while Treasury looked the other way, represents the worst abuses to American citizens I’ve ever seen, read about, or imagined could occur… at least since the pre-union abuses of laborers by Robber Barons at the beginnings of the 20th Century.

No one is pro-scammer, mind you… everyone hates the idea of a homeowner being scammed out of money when at risk of losing a home, or at any time, for that matter.  But I think it should be clear that the only way to stop the spread of scammers is to make legitimate assistance abundant.  Just imagine if the State of California had announced that you could find legitimate assistance with a loan modification at every Starbucks… no more scammers, right?  Why would you need to search for such assistance using Google when you could get meaningful help while your decaf low-fat latte was being prepared?

Our regulators need to understand, and it’s about time they did, that homeowners at risk of foreclosure are going to try to get their loan modified on their own if that’s what the government says they should do, but when they find out that they can’t get it done… well, they’re going to write someone a check before they give up and look for a place to rent.  If they find legitimate help, great.  But they’ll write a check to organized crime before they walk away from their homes without trying something else.  And no one is going to change that fact… water is wet, the sky is blue, and… you get the idea, right?

Think about prohibition.  Want to get rid of bootleggers?  Only way to do that is to put legal liquor stores on the corners.  You can break up stills, and chase down illegal rum runners all you want, but put a legal liquor store on the corner and presto… no more bootlegger.

We need our lawyers to get us through this… simple as that.

The one thing you don’t want to do is pass a law that removes only legitimate attorneys from the marketplace, and yet that’s precisely what California did in 2009 with the passage of SB 94.  I know… the state didn’t know what else to do… they thought the new law would help, but they were wrong on all counts.  SB 94 hasn’t eliminated or even reduced the number of scammers preying on homeowners at risk of foreclosure.  In the last few days alone, I’ve received links to Websites offering the most insane schemes to prevent foreclosure I’ve ever seen and some that I couldn’t have come up with in a hundred years.

Have you heard of “assets for value”?  Who came up with that convoluted concept that requires you to buy into the supposed fact that there is no federal government having something to do with our nation coming off of the gold standard?  Or how about some sort of club that you join to get your house free and clear?  There’s a whole slew of “put-off-your-trustee-sale-date-for-a-grand companies.  And others that claim to represent a hedge fund that’s going to buy your note from your bank and then sell it to you for less, but they can bever seem to be able to tell you the name of a homeowner fro whom their plan worked, or even the name of the hedge fund, as if such a thing would be kept secret were it in any way true.

And, of course, we’ve all heard about the forensic loan audit that is going to bring your bank to its knees for failing to do something for which the statute of limitations has expired years ago, or that requires you to get relief by refinancing and repaying your loan.

Some of the scams out there are so far out there that’s it’s hard to believe that anyone would be sucked in… until you talk to a salesperson at one of these operations and that’s when you realize how good someone of these people are at getting you to believe their stories.  If you weren’t a homeowner in a panic, you’d never buy any of this, but when it comes to losing a home, people will try anything.  And that’s why the unintended consequence of SB 94, although I certainly wrote about what its passage would bring on numerous occasions, has not been to stop scammers, but more so it’s made them harder to find as they carefully crafted ways to charge homeowners outside the law.

It;’s common sense really… laws only matter to law abiding people.  Scammers don’t care about the laws… which is why they’re called scammers.  I mean, when SB 94 was passed in California, thus making it illegal for a real estate licensed person to accept a fee for helping a homeowner get a loan modified, it was already illegal to rip someone off for three grand, wasn’t it?  I’m not an attorney, but I’m pretty sure taking someone’s three grand and delivering nothing in return was always against the law.

But what it did accomplish was to take all of the legitimate companies that were offering to help homeowners out of business because no one can work to get someone’s loan modified for God only knows how long the servicer takes to stop losing paperwork and actually look at someone’s file, and then send a bill for services… a year down the road… and even then hope that the homeowner isn’t so all-fire mad by then that they will actually pay the bill.  And if someone doesn’t pay, what then?  Ruin their credit?  Come on now… let’s be adults about this… I pay my bills but I’m not even sure I’d pay that one a year down the road after being jerked around like chum on a line for months at a time.

So, SB 94 took the legitimate providers out of the business and that includes hundreds or maybe even thousands of lawyers as well.  The scammers… oh, they’re doing just fine, thank you very much.

I recently taught a continuing education class, along with two attorneys, for the Orange County Bar Association.  There must have been something close to 100 lawyers in attendance, but I was shocked when the room was asked how many were offering loan modification services and less than 20% put up their hands.  Why were they there, I thought to myself, and then it became clear… none of them knew for sure how they were permitted to get paid by clients needing help with a loan modification.

I’m sorry State of California, but if lawyers can’t figure out what a law allows and doesn’t… there’s a problem with the law.  If travel agents weren’t sure how a new law affected them, well… that’s one thing, but an entire room full of licensed practicing attorneys?  If they don’t know, who should know?

The FTC’s recently enacted final MARS (“Mortgage Assistance Relief Services”) rule, for example, regulates all providers of loan modification services nationwide, and prevents such providers from charging homeowners before a loan modification has been offered by the servicer.  But the FTC’s rule also allows for licensed attorneys to be exempt from that requirement, recognizing that without a retainer up front, an attorney could not offer to represent a homeowner seeking a loan modification.  Under the new MARS rule, therefore, lawyers are allowed to charge a retainer up front, as long as that money is deposited in the attorney’s trust account and earned as services are rendered.

You know… the way lawyers have always charged their clients for just about everything.

SB 94 has made it much more likely for a homeowner to find a scammer because it has taken at least hundreds and perhaps even more legitimate lawyers out of offering the services related to a loan modification, while the scammers have just found ways to appear outside the law and therefore are that much harder to catch and shut down.

Something has to be done and I’m going to take a shot at doing it.  Stay tuned to Mandelman Matters for updates, and for more exposing of the scams that are turning up around every Internet search.  We’re three plus years into this crisis and the government continues to fail at every turn and in every way when it comes to stopping or even slowing foreclosures.  There’s just no excuse for this sort of thing to go on any longer, and I’m going to take a shot at both exposing and getting the State Bar to do something helpful.  Because we need our lawyers to get us through this, and those lawyers need to know how they are permitted to practice in this area, just like the lawyers now do in the other 49 states.

To read more about why I supported the attorney exemption contained in the FTC’s final rule, here’s a link to an article I wrote last year:  FTC Considers Wrong Approach to Protecting Homeowners from Loan Modification Scams… http://mandelman.ml-implode.com/2010/02/ftc-considers-wrong-approach-to-protecting-homeowners-from-loan-modification-scams/

But enough of what I have to say… even I’m tired of listening to me on this topic.

Just a couple of days ago, I received the following letter from an attorney from San Diego.  I was so moved by the letter that I asked for and received permission to post it.  Needless to say, I’ll be including him on my listing of trusted lawyers, a list I’m expanding as fast as I can.  No one knows what the outcome will be when negotiating with a servicer today, but if you can’t get anywhere you should be able to hire a lawyer and know that, if nothing else, he or she will do everything possible to save your home.  And that you most certainly won’t get ripped off.

Here’s what a San Diego, Ret. Navy, attorney had to say after finding an article I wrote last year about SB 94…

Dear Mr. Mandelman:

I am sorry I missed your blog of September 9, 2009 concerning SB 94. I was trying to find a copy of SB 94 when I found your blog. You were so on the money!

I am an attorney and at the time I was doing loan modifications and if you read the below response, you will see I was successful with them.  SB 94 killed my loan modification practice for all of the reasons you laid out in your blog.

Yesterday I saw the attached article on the State Bar web page and I nearly lost my mind. So I prepared the response you will find below.

Unlike the attorneys in your blog, if any of this is helpful, cite me. I do not care. The State Bar has harassed me before and as I told them then, dis-bar me, make my day. I am tired of dealing with lying crooked attorneys, crooked judges and a corrupt State Bar. (Oh the stories I can tell.) But I also told them they would have to prosecute me because, I will not go quietly into that good night.

I hope you enjoy the response. I did get Senator Calderon’s name and position from your blog, so thank you.

Albert M Sterwerf, USNR Ret, Attorney at Law

Dear Ms. McCarthy:

I just read your article “No let-up in loan modification complaints” about James Towery’s pursuit of the small number of lawyers who were doing improper work with regards to loan modifications. I noticed that your article did not answer some very important questions. Such as:

1.      Is the State Bar going after the attorneys working for the banks who are illegally conducting the foreclosures you discussed in your article? No? Oh, that’s right SB 94 specifically exempted those attorneys working for banks who are responsible for the foreclosure crises.

2.      Is the State Bar going after the attorneys working for the banks who are committing ethics violations, such as illegally contacting parties represented by a counsel (SB Rule # 2-100) or the so call “robo-signing” of thousands of documents a day without any review (SB Rule 3-110), etc.? No? Oh, that’s right SB 94 specifically exempted those attorneys working for banks from being prosecuted for their ethical violations while conspiring to steal people’s homes and life savings.

3.      How is SB 94 constitutional, such as equal protection issues, right to counsel issues, right to contract and so on, when SB 94 limits the mortgagee’s ability to contract with an attorney, i.e. preventing the mortgagee from paying the attorney a retainer until the loan modification was completed, but the same requirement is not placed on any other attorneys in the state, including the attorneys working for the banks who are conducting the illegal foreclosures you referred to in your article?  Again the banks’ attorneys are specifically exempted in SB 94. I am starting to see a pattern here, under SB 94 the banks’ representatives seem to be exempt from all of these rules and laws in California. Why is that? Who did write that bill? Oh yeah, California State Senator Ron Calderon, the Chair of the Senate Banking Committee. How much money do the banks have?

4.      Since attorneys doing loan modifications can only be paid after they successfully get their client a loan modification, are the State Bar and the legislature going to make the payment of retainers illegal for all attorneys? After all, if it is good for attorneys doing loan modifications, it would be even better for divorces or criminal prosecutions or civil defense cases, etc. Why shouldn’t all attorneys have to wait to be paid until after all of the work is done on the case?

5.      Since attorneys doing loan modifications can only be paid after they successfully get their client a loan modification, are the State Bar and the legislature going to make it illegal for all attorneys to be paid if they fail to win their cases? I do not see any rush to make criminal defense attorneys return the money to their clients in jail or prison. Or those prosecutors that we all pay for, shouldn’t they only be paid when they get a conviction? Think of how much money we could have saved on the OJ Trial if we had not had to pay Darden and Clark their bonuses! They lost didn’t they?

6.      In all of the complaints you discussed in your article, how many attorneys were wrongfully accused and forced to defend themselves against frivolous complaints?  You did not answer that question, but I did see that you did lump the innocent attorneys in with the guilty. I guess is sounds better if you double the number of all of the cases dismissed as if they were all against “guilty attorneys”. It seems the State Bar does not mind condemning the innocent with the guilty.

Since you are a staff attorney for the State Bar, I guess these questions were not important to you.

However, they are to me! The State Bar and SB 94 destroyed my loan modification practice so it is personal to me as is California families who have lost their homes and life savings because of SB 94 and the State Bar. I take offense at your cavalier treatment of all of the people that have been hurt by SB 94 and the State Bar.

Prior to SB 94, my office had over a 99% success rate on loan modifications and for the one failure(?) that I had, I complied with the terms of my contract and refunded my client’s money to them. I was unable to obtain the loan modification in that case because the client would not comply with the “bank’s requirement” that he miss two payments before they would even talk to him or me about a loan modification. (The requirement for the mortgagee to miss two payments was set up by the banks so that they could subsequently foreclose on the properties and in the process harm the mortgagee’s credit rating thereby making it more difficult for them to qualify for any other types of assistance including Federal HUD refinancing plans which in many instance could have assisted the mortgagees in saving their homes.)


Prior to SB 94, I took one case in which the client was to pay me after I completed the loan modification. This resulted in me not getting paid after I successfully completed the loan modification for my client. I do not remember the State Bar offering to help me get paid by my client. This case was pre SB 94 and the law did not apply to that case, but based on that case, I realized that I could not run my practice doing loan modifications if I could not get paid up front for the work I would do on the loan modification and had to wait until the loan modification was completed in the hope that my client would pay me.

I cannot run a law practice in which I and my office would spend months of work consisting of hours of time preparing the required documentation and more hours on the phone going through the bank’s run around and transfers (On one call I was transferred between 6 different people in 4 different states over 2 ½  hours and I had to start over at the beginning with each person I spoke to.) and repeatedly faxing and mailing documents to the banks (which the banks consistently lost, ignored or simple said they did not receive despite evidence of their receipt, i.e. proof of mailing and receipt of fax verifications) to not get paid after I successfully got the client a loan modification.

The State Bar knew that SB 94 would make law practices like mine untenable and that most attorneys in the field of loan modifications would have to terminate that part of their practice. The State Bar knew it was cutting the legs out from under the attorneys who were the only ones protecting the families of California, by making it illegal and punishable as a felony the same conduct that every other attorney in the State of California is allowed to do, to accept a retainer.

But the State Bar did not care that it was hurting the people of California, as long as the attorneys working for the banks, the parties with lots of money, were protected. Which Senate Committee is Senator Caldron the Chairman of again? Oh yeah BANKING!

Thanks to SB 94, I now have people coming to me, people I could have helped save their homes, after their homes have been sold in foreclosure sales and the story these people tell me is fairly consistent, “I was doing a loan modification myself, they asked me to send them some more information, I sent them the requested documentation, then I got the notice that my home had already been sold in a foreclosure sale.”

That is okay. SB 94 makes unconscionable conduct by the bank lawful!


I can tell you. No where! When I was doing loan modifications, my clients consistently informed me that their banks continued to contact them despite the banks being on record that I was my clients’ attorney. When my clients told the banks that they had an attorney the banks told them, “We don’t like working with attorneys. You don’t need an attorney. We want to talk directly to you.”

Somehow the term, “You don’t need an attorney,” sounds familiar. Oh yeah, SB 94 again, attorneys doing loan modifications have to provide their clients with a notice that they can do loan modifications themselves and that they do not need an attorney or the attorney can go to jail and be convicted of a felony. Wow! I wonder how that got into SB 94? Who wrote that bill again? Senator Caldron the Chairman of the Senate BANKING Committee.

It is funny, I thought the State Bar was there to protect me as an attorney, not to make me a felon for helping people try to save their homes.

Do criminal attorneys have to provide written notice to their clients that they can represent themselves and that they do not need an attorney? I somehow do not remember that being a requirement.

Another funny thing I noticed, that while I would have had to tell any prospective loan modification clients that they did not need to have an attorney, not one bank gave up their attorneys and when I tried to deal directly with their attorneys, I was denied access to them.

I called the State Bar to complain about the banks’ attorneys ignoring me and my office and going around me to directly contacting my clients.

The State Bar’s response, “We don’t care.”

Then the State Bar supported SB 94, when I called about that and pointed out how SB 94 left all of the mortgagees, the people that the law was supposed to protect, without lawyers, the

State Bar response was, “We don’t care.”

When I asked how I was supposed to run a law practice doing loan modifications I was told, “If you are a competent lawyer, you will not mind getting paid after the work is done.”

So I go back to unasked questions 4 and 5 above, are all attorney retainers going to be made illegal? After all, if the lawyer is competent, they should be willing to be paid after the divorce is done or when their client is in prison, or how about prosecutors only getting paid when they get a conviction. If it is good enough for attorneys doing loan modifications, it should be good enough for all attorneys. As the State Bar says, “If you are a competent lawyer, you will not mind getting paid after the work is done.”


As for Mr. Towery’s successes, congratulations. For the twenty lawyers that have been punished, how many thousands of California families have lost their homes to the banks who are protected by SB 94? How many billions of dollars have the banks stolen from the people so that Mr. Towery could get his twenty lawyers? Yahoo!

I would like to see the numbers breakdown for the following sentence in your article, “And between 2007 and 2010, the number of cases resolved through warning letters, stipulations, closure or filing of charges doubled from 902 to 1987.” I would like to see this broken down because I noticed that “closures” i.e. cases where no action was taken against the attorneys, i.e. the attorney was wrongfully accused, was lumped in with the warning letters, stipulations and filing of charges.


Why has Mr. Towery’s office been able to go through so many cases as you discussed in your article? For two reasons:

The first reason is that over 90% of the complaints of misconduct was by the 20 lawyers that were prosecuted. It is my guess, since the article was not clear on the matter, that the 20 lawyers either ran or worked for the client mills that were scamming thousands of  clients. When the State Bar gets a complaint against the attorneys that have already been disbarred or resigned, the complaint can be quickly dismissed since that attorney has already been punished. That means hundreds if not thousands of complaints which are due to those 20 attorneys can easily be dismissed.

Therefore, the majority of the valid complaints to the State Bar came from a few client mills, which were simply churning clients and performing no work. (Before you become too judgmental on these organizations, there unconscionable conduct is much the same actions that the banks were doing to obtain the illegal loans in the first place and when people contacted them for loan modifications and are what the banks are now doing to get their illegal foreclosures. Let us not forget, the State Bar and SB 94 protects the banks and their attorneys.) Just one of these client mills had over a thousand files or cases. So that means over 1,000 possible complaints against the lawyer involved with this client mill could be dismissed out of hand because the attorney responsible has already been punished.

I was contacted by one of these client mills to see if I would assist them, but I was unwilling to work under the conditions they desired and we went our separate ways. I did not know at that time that the organization was not performing the work or any other ethical violations; I simply was not willing to work on the large volume of cases they demanded and therefore I maintained a client base that I was able to manage.

The second reason that Mr. Towery could clear up so many backlogged cases is because most of them are frivolous! I had to defend myself against a claim based on one of my loan modification clients. I got the loan modification for my client (Pre SB 94) as per our contract and then months later the client tried to get the money back that I had earned and in an effort to coerce me into paying them the money, they first threatened and then filed a complaint with the State Bar.

So I had to spend valuable time and effort, away from helping my clients, defending myself against the frivolous claim of a client who was satisfied with my work until he heard about the State Bar prosecuting attorneys doing loan modifications and thought he could get his money back.

If Mr. Towery believes he is going to bust a lot of attorneys for loan modification scams, he needs to contact the substance abuse counselors at the State Bar. Most of the attorneys and other professionals that were doing loan modifications stopped after SB 94 leaving the mortgagees without any legal help and the majority of the people who are still doing loan modifications will be following the letter if not the intent of the law.

I am sorry, I made a mistake. The mortgagees are not totally without legal assistance. They can call the HUD recommended free services for help. I called a few of them to see who I could recommend to the people coming to me to for assistance. From what I could determine from my communication with these “free services”, two proverbs that came to mind, “You get what you pay for,” and “When you buy a diamond for a dime, you get a diamond not worth a dime.”  I could not recommend any of the services I spoke with to the people who came to me for help.

I have had clients, post SB 94 clients, whose houses have been sold in unannounced foreclosure sales and they want me to help them get their houses back after the HUD recommended agencies had failed to perform. Yahoo SB 94!

That is another of those interesting little tidbits of SB 94, attorneys doing loan modifications have to tell their clients, in writing, that they do not need an attorney and to tell them they can go to the HUD recommended free services for help. I do not remember that requirement for criminal attorneys or divorce attorneys or malpractice attorneys or the attorneys working for banks.

The point is I know where the majority of the complaints to the State Bar came from and therefore I know that the number of attorneys involved has to be fairly limited. So to punish a few (20) bad attorneys, who could have been punished under existing ethics rules and laws, the State of California and the State Bar have allowed hundreds of thousands of California families to be thrown out of their homes. Again Yahoo!

So to answer the implicit question in the first sentence of your article, i.e. “Despite extensive efforts over the past two years to rein in improper loan modification activities by some lawyers, including legislation and aggressive prosecution by the State Bar and the attorney general, complaints from clients continue unabated.” The complaints keep coming in because people are losing their homes and life savings because the State Bar and the State of California threw them to the wolves, i.e. the banks, and then cut them off from the only people who could have protected them, their attorneys. Then after throwing them to the wolves, the State Bar has said, complain to us about your attorney and get your money back. So it is no surprise that the complaints continue to come in.

Not only did the State Bar throw the people of California to the wolves, it threw us attorneys helping them under the train. Thank you!

In case you are thinking that I am making up the above observations about SB 94 below are significant portions of SB 94.

SEC. 6.  Section 10133.1 of the Business and Professions Code is amended to read:

10133.1.  (a) Subdivisions (d) and (e) of Section 10131, Section 10131.1, Article 5 (commencing with Section 10230), and Article 7 (commencing with Section 10240) of this code and Section 1695.13 of the Civil Code do not apply to any of the following:    (1) Any person or employee thereof doing business under any law of this state, any other state, or the United States relating to banks, trust companies, savings and loan associations, industrial loan companies, pension trusts, credit unions, or insurance companies.

To be completely clear, SB 94 explicitly states that Civil Code Section 1695.13 does not apply to banks and their employees, yet that code section states:

CC § 1695.13.  It is unlawful for any person to initiate, enter into, negotiate, or consummate any transaction involving residential real property in foreclosure, as defined in Section 1695.1, if such person, by the terms of such transaction, takes unconscionable advantage of the property owner in foreclosure.

SB 94 SEC. 10.  Section 2944.7 is added to the Civil Code, to read:

2944.7.  (a) Notwithstanding any other provision of law, it shall be unlawful for any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, to do any of the following:

(1) Claim, demand, charge, collect, or receive any compensation until after the person has fully performed each and every service the person contracted to perform or represented that he or she would perform.

(2) Take any wage assignment, any lien of any type on real or personal property, or other security to secure the payment of compensation.

(3) Take any power of attorney from the borrower for any purpose.

(b) A violation of this section by a natural person is a public offense punishable by a fine not exceeding ten thousand dollars ($10,000), by imprisonment in the county jail for a term not to exceed one year, or by both that fine and imprisonment, or if by a business entity, the violation is punishable by a fine not exceeding fifty thousand dollars ($50,000). These penalties are cumulative to any other remedies or penalties provided by law.

(c) Nothing in this section precludes a person, or an agent acting on that person’s behalf, who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, from doing any of the following:

(1) Collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a nondelinquent loan, after the borrower reduces the unpaid principal balance of that loan for the express purpose of lowering the monthly payment due under the terms of the loan.

(2) Collecting principal, interest, or other charges under the terms of a loan, after the loan is modified.

(3) Accepting payment from a federal agency in connection with the federal Making Home Affordable Plan or other federal plan intended to help borrowers refinance or modify their loans or otherwise avoid foreclosures.

Sub-Section C is the interesting paragraph, especially when it is understood that a “bank” is considered a “person” for this section. How about that, the prohibitions do not apply to the banks or their agents.

So SB 94 makes it a crime for an attorney to represent property owners punishable by incarceration simply for being paid for work to be performed just like every other attorney in the State of California is allowed to do, yet it allows banks and their employees, i.e. attorneys working for the banks, to unlawfully and unconscionably take advantage of property owners in foreclosure.

Please tell the president of the State Bar not to send me any more requests for donations. I gave with the rest of California with SB 94.


Albert M Sterwerf, USNR Ret., Attorney at Law


Mr. Sterwerf, I just can’t thank you enough, if for no other reason, than to make me feel that much less alone.

What’s being allowed to go on in this country is not something I could have ever imagined.  It’s no different that were I to be forced to watch the U.S. Army water-boarding American citizens.  Our government has simply sat idly by while literally millions of American homeowners have been tortured mercilessly and without recourse by our banks and mortgage servicers.

In fact, I’ll go even further… I’ll bet money that I can find thousands of homeowners in this country that would have volunteered for a couple of days of water-boarding if it meant not having to endure the torture meted out by their servicers that they all-too-often have endured for a year or more… before losing their home anyway.

“I’m sorry, Mrs Smithstone, we’ve gone and lost your paperwork once again.  We’re so sorry, but you have to understand… we’re a bank… we lose stuff all  the time.  Not our money, of course, but yours… well, it comes and goes… that’s just the way it is around here.  Complain?  Why sure you can complain… hold on while I get you the number for our complaint line… click… dial tone.”

“Oh, Mr. Stonesmith, now you’re taking those HAMP guidelines awfully literally, don’t you think?  I know it says you’ll get a loan modification if you make all your trial payments on time, but did you read our addendum to those rules?  I didn’t think so… our rules say that you have to be wearing a purple hat every time you call and then say the magic word: “Pluthtarth Ingybingy” within 5 seconds of when we answer the phone.  So, you’re home was actually sold last Thursday.”

Is this Ms. Smithrock?  Yes, well hi to you too.  Listen you’ve been denied once again for a loan modification, but I do have some good news for you… we’ll go ahead and let you reapply for another loan modification, and all you have to do is send us a check for $10,000 and keep making those trial payments that don’t apply to anything.  Plus, I asked my boss, and he said we wouldn’t be denying you again for another four or five months… as long as you’ll pay the property tax bill that’s coming up.”

Oh, Mr. Rocksmith, you don’t want to refinance, you want a loan modification.  Just stop making your payments and call us in say eight or nine months, and we’ll be taking care of that bothersome mortgage payment you’ve got hanging around your neck before you know it.  That’s right, don’t worry about a thing…”

Look, anyone that doesn’t realize that we need our lawyers to get us through this simply isn’t paying attention.  From robo-signers to trustees that can’t even prove they own the loan they want to foreclose on… to GAMC who just keeps foreclosing on one couple in Ohio even though they keep making those pesky payments on time.  The cases of servicers breaking laws and rules are coming at us faster every day.

And our government obviously doesn’t care… or at least they don’t care much.  Why, cause as far as they’re concerned, we’re all nothing but a bunch of irresponsible homeowners that caused this financial catastrophe, and we don’t deserve anything better than what we’re getting already.  I’m sorry to have to break it to you, but that much is clear.

Luckily, we still have laws and lawyers.  We’re a nation of laws, as a matter of fact, forged by lawyers.  And, as we’re seeing happen more and more each day, the banks may be able to buy our legislators, and even our president, but they just aren’t having much luck getting to the thousands of judges in this country who are starting to smell a rat, and by rat I mean banker.

The FTC’s rule is good enough to protect the homeowners in the other 49 states, why can’t we live by it here in California.  SB 94 isn’t doing anything but making it impossible for licensed attorneys to help homeowners when they are being jerked around by their banks and servicers.  Isn’t it clear yet?

SB 94 is simply a law written by the Senate Banking Committee to make it next to impossible for a homeowner to hire a lawyer when at risk of foreclosure.  I bet the banks wish they could have passed such a thing in Florida and then maybe none of this nasty robo-signer business would have come out, and they could have just kept on illegally foreclosing with fraudulent documents for as long as they pleased.  That would have been nice for the banks, wouldn’t it?

Something else you should know… remember all those scamming lawyers that we were told were raoming the countryside scamming everyone out of their money left and right?  And remember the 8,000 complaints that are now 2,000 complaints?  Yeah, well a year later, the State Bar has taken action against 20 lawyers… TWENTY LAWYERS, and that includes lawyers who didn’t get convicted of anything… 12 of the 20 simply resigned.

There are 200,000+ lawyers in California.  We needed to take thousands of legitimate lawyers away from homeowners because 20 were doing something wrong?

It’s ridiculous.  To any thinking adult, it’s just plain ridiculous.  Stop the banking lobby from making laws that only help them not get caught.  Write to your state senator and tell them you’re paying attention to what’s happening as a result of SB 94.  Tell them you don’t want it to be difficult or even impossible to hire an attorney if you want to hire an attorney.  We have a right to legal representation in this country.

We need our lawyers to level the playing field and fight the banks who are unjustly taking our homes even when the investor would make more money by modifying the loans.  And put the bad guys in jail where they belong… for a change.

And me? I’ll take water-boarding for $200, Alex.

Mandelman out.

Want to read more about what I’ve written on this topic… here’s a few just to get you started… why am I like the only person writing about this topic… I don’t even know anymore, but it sucks, I’ll tell you that.  And it’s pissing me off because I could keep adding links below until there were so many I’d want to eat a gun.  Can’t we just get this one thing right?  Do I have to make an entire f#@king career out of this one stupid easy subject?  Dear God…

Loan Modifications and the Right to Representation (May 2009)

Did Attorneys “Turn Bad” in 2009?  What… is there Something in the Water (August 2009)

Journalists on Crack… Are Lawyers Turning to Crime in Tough Times? (January 2010)

US District Court Chief Judge Gonzalez Says WaMu’s Conduct Appears Immoral, Unethical, Oppressive, Unscrupulous or Substantially Injurious to Consumers (November 2010)

Kings of Loan Mod Scams – Arizona, Nevada Sue Bank of America Over Loan Mod Program (December 2010)

Legal Aid for Homeowners – Perhaps the only thing for which TARP funds cannot be used (December 2010)

Chris Adams, McClatchy Newspapers, Get It! Servicers Suck. (October 2009)

A Bill in California Will Establish That Lawyers Cannot Be Trusted (August 2009)

My Year in a Trance: What I’ve Learned About Loan Modifications (May 2010)

2 Years Waiting for New York Times to Cover Lawyers & Loan Mods and they still get it wrong (December 2010)

How to Tell Legitimate Loan Mod Firm from Illegal Operation – The FTC’s Bright Line MARS Rule (December 2010)

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