California Bar: Disregards Attorney General’s Views, Screws Homeowners

It’s official.  If you’re a homeowner in California at risk of foreclosure, and need to get your mortgage modified in order to save your home, the single most dangerous thing you can do… is try to find a lawyer to help you.  

And the blame for that deplorable state of affairs lies squarely at the foot of the State Bar of California, although I suppose the state legislature would have to be credited with an assist.

It’s not hyperbole and I’m not kidding… I’m being dead on serious and accurate.  In California, we have finally managed to take a horrific situation, and by applying everything from apathy to ignorance, make it exponentially worse.

What’s even more stunning, is that four years after the Obama Administration’s Making Home Affordable HAMP loan modification program was launched, and for the most part, institutionally WE’VE LEARNED NOTHING about the loan modification process, and that not only applies to California, that’s true nationwide.  In point of fact, what the State Bar of California knows about the loan modification process today you could put in a thimble.

How is it even possible to have something going all around us for four straight years… something as important as saving homes from foreclosure… that we’ve collectively managed to remain resolute in our ignorance?  Do we have some sort of widespread institutional learning disability?

No.  It’s simple, really.  We don’t give a damn about it.  Getting your loan modified means you’re a deadbeat borrower… you bought a house you couldn’t afford… should never have even been approved for the loan… and the faster you’re evicted the better, as far as we are concerned.  So, don’t even talk to us about the loan modification process and how it should be handled in order to prevent as many foreclosures as possible, we just could not care less.

Besides, isn’t that whole foreclosure thing almost over anyway?  That’s what the news on T.V. and in the papers have been saying.  So, what’s the problem?  I’m doing fine.  In fact, I’m hoping you get thrown out of your house soon, so perhaps I can go buy it on the cheap.  Maybe you should stop whining and get a job.

Well, alrighty then.  If that’s how we want it, I guess there’s not much I can do about it.  But, let me assure you of something before I acquiesce to the madness: We’re making a terrible mistake that is going to cost every single citizen of this state a lot of money and ultimately contribute to lowering our standard of living both in California and as a nation.

There’s no question about that, by the way, but unfortunately the reason there aren’t any questions is that institutionally we’re too ignorant to even come up with one.

Let’s get to this fast, before I lose most everyone to some combination of ADD, American Idol, Internet porn and substance abuse.  There are only THREE FACTS you need to know.

 

FACT #1: The foreclosure crisis is NOT close to being over, in fact, the worst is yet to come.

 

I won’t spend a lot of time on this point because I’ve covered it so many times it makes my hair hurt.  You can read my more recent articles on this topic HERE, HERE, HERE, HERE, HERE, HERE, and HERE.  

As of the end of this year, we will have lost FIVE MILLION homes to foreclosure… and 10 MILLION MORE American households have faced the prospect of foreclosure since the crisis began during the third quarter of 2006.  Add to those the numbers the 5.3 MILLION NOW in the foreclosure pipeline, meaning they have already received a foreclosure notice or are over 30 days delinquent… and 3.3 MILLION of them are over 90 days delinquent or already in pre-sale inventory.

In addition, it’s interesting that no one wants to talk about the COMPLETED BANK REPOSSESSIONS continuing at the rate of about 50,000 A MONTH, with foreclosure starts at 100,000 A MONTH.

And in California specifically, RealtyTrac reported as recently as December 6, 2012, that California is flanked only by Georgia and Arizona when it comes to posting the country’s highest percentage of foreclosure sales.  Statewide, 36 percent of sales last quarter were foreclosures, but in Modesto foreclosures represented 54 percent of sales, Stockton was 53 percent, and Sacramento was 40 percent.

Now consider that according to RealtyTrac, “in a normal, healthy market, honestly you’d expect to see less than 5% of all sales be foreclosure related.”  So, we’re a long way from having a “healthy” market, no matter how you slice it.

 

FACT #2: The only way California homeowners save homes from foreclosure in any number is by getting their loans modified.

 

First of all, according to the Progress in Lending Association, the mortgage servicing industry has “completed more than 5.82 million permanent loan modifications since 2007.”  The federal government’s HAMP program accounts for roughly a million of those, and the Treasury Department’s most recent HAMP report, shows that a little over 200,000 California homeowners have had their loans permanently modified under HAMP.

Secondly, the Center for Responsible Lending (“CRL”), a nonprofit, non-partisan organization that works to stop foreclosure during this housing crisis and protect homeownership and family wealth, in it’s June 2012 policy brief, highlighted the results of its most recent study of loan modifications and their effectiveness as a mechanism for keeping borrowers at risk of foreclosure in their homes over time.

The CRL, analyzing loan modification data specifically for California, showed that 80 percent of the borrowers that received permanent loan modifications in 2010 have remained current on their mortgage payments, and in fact only 2 percent of these borrowers have since lost their homes to foreclosure.

And the CRL’s numbers are that much more remarkable when you take into account California’s relatively high and persistent unemployment, and the degree to which California’s homeowners are “underwater,” which in California hovers around 35 percent on average, but is quite commonly is 50 percent or more.

When you combine the results of the CRL study with Treasury’s latest report, it’s unquestionable that loan modifications are by far the most effective tool we have for keeping borrowers at risk of foreclosure in their homes.  In fact, based on the numbers, I would argue that there is no number two.

In California, and throughout the country, when it comes to saving your home from foreclosure, it’s essentially loan modifications or nothing.  That’s not an opinion… it’s an equation.  The numbers are what the numbers are.  I don’t know how many homeowners have saved their homes from foreclosure by suing their bank, but I’ll be happy to wager any amount with anyone that nationwide the answer is a three digit number, and under no circumstances more than a four-digit number.  (Any takers?)

And one last point… based on data provided by the California Reinvestment Coalition (“CRC”), an organization made up of over 300 nonprofits and public agencies, in their study of the costs of foreclosures to local governments published in September of 2011, California’s 200,000 loan modifications saved local governments close to $4 billion that would have been spent on such things as increased costs of safety inspections, police and fire calls, and trash removal and maintenance, were those homes lost to foreclosure.  That’s FOUR BILLION… with a ‘B’.

By the way… the same CRC report last June showed over 700,000 California homes in the foreclosure pipeline.  If 200,000 modifications saved the state $4 billion, what would 700,000 save us?

I don’t know the answer to that question, but if it were 800,000, that would be four times the 200,000 that saved $4 billion… so, what… maybe $15 billion?  That’s a lot of money to the State of California, in fact, that’s as much as our budget deficit today.  We don’t need to double our deficit… the one we can’t figure out how to pay off already.  So, what will it be?

Keep not understanding and denying the problem exists, and wait for it to bankrupt us so we can suffer through the austerity measures that will inevitably come.  Or do everything we can to minimize the damage.  A novel approach, I realize, but something to think about.

 

FACT #3: What we should have learned about the optimal loan modification process.

 

The foreclosure crisis is not new.  Foreclosures in this country first spiked during the third quarter of 2006, for heaven’s sake.  HAMP was launched just shy of four years ago.  Frankly, it’s inexcusable and shameful  that institutionally we haven’t learned anything meaningful about how foreclosure avoidance and loan modifications SHOULD be handled.

And we haven’t learned anything new, or if we have we’re keeping it a secret.  Call any state agency and ask what you should do to save your home if at risk of foreclosure and you’ll get the EXACT same answer you would have received four years ago… word for word: Call your bank directly… or contact a HUD approved housing counselor.

That’s it and that’s all.  We’ve lost five million homes to foreclosure since 2007… we’ve modified almost six million mortgages since then too.  And I don’t even know how many millions of loan modifications we’ve botched… screwed up… failed to provide even though we should have modified the loans.

 

 

And we’ve learned nothing more than my friend’s parrot would have during that time… SQUALK… Call your bank directly… or contact a HUD approved housing counselor… SQUALK.  (Actually, my friend’s parrot probably could have learned several other phrases over four years, so maybe the parrot would have actually outperformed our capacity for institutional learning in this country.)

Now, let me be very clear here… I am NOT trying to tell anyone not to contact their bank directly, nor am I saying anything negative about HUD approved housing counselors.  By all means, do those things first and if either works out for you that’s just fantastic.

All I’m saying is that today, and consistently over the last four years, I receive every single day, seven days a week, emails from homeowners all over the country for whom it didn’t work.  On a slow day I’ll get five.  Some days I get 30.  In my ‘saved’ folder right now I have close to 6,000, and I don’t save all of them.  Also, I have 28,474 unread messages.

How about if we just say that obviously, “call your bank directly or call a HUD counselor” isn’t a strategy that’s working for everyone?  I think that’s a fair statement no matter who I’m talking to.

So, let’s forget what has happened over the last four years for a moment, and having learned from the past, let’s take a look at what SHOULD have happened, had the process been more optimal.  And in doing so, let’s answer the question: Do you need a lawyer if you’re facing foreclosure?

 

The optimal approach to the foreclosure avoidance process

 

If you’re at risk of foreclosure, or think you will be soon, there are actually only 7 OPTIONS you can consider to avoid foreclosure: 1) Loan modification, 2) Short sale, 3) Deed in Lieu, 4) Chapter 13 Bankruptcy, 5) Some form of litigation, and I suppose… 6) Strategic default should be included on the list, even though technically it’s a path that does end in foreclosure… it is a strategy intended to put the borrower losing a home in a better position.

Number seven is to pay whatever is required to bring the loan current and then continuing paying the loan as originally agreed.  I know, I know… few can do that, but regardless it’s an option that can avoid foreclosure so it goes on the list.

Each option on that list of seven strategies has its own pros and cons… each has different ramifications… different costs, different timeframes, different probabilities of success.  And, in addition, each homeowner has their own unique set of facts… their own degree of willingness to fight… their own financial resources… and their own tolerance for risk… and stress.  Every single person who finds themselves at risk of foreclosure is different… like snowflakes… no two are alike.

They do have one thing in common, however, they want to save their homes… stay living in them… not everyone, I understand, but most.  So, most think they want to get their loan modified, but the fact is, if we’re being intellectually honest about this, they don’t really know… they can’t know… until they know all the facts.  Once they do, then they can make a decision as to which path they want to follow.

And before I say anything about the available paths… and I want to be very clear about this… I don’t care what anyone decides one way or the other… it doesn’t matter to me in the least.  If I know someone personally, or hear about someone losing a home, I’ll feel badly for them, but that’s where my interests both begin and end.

And so we’re clear, I HAVE NEVER BEEN PAID A DIME by a homeowner or a lawyer or anyone else for that matter having to do with homeowners preventing or avoiding foreclosures.  I am ONLY interested in homeowners being accurately informed of all the facts involved in all of their alternatives before they chose which one they should follow.  And that doesn’t happen very often, which is tragic and wrong.

Here are just a few of the reasons why your uniqueness matters… off the top of my head, as it were.

• If there’s a second mortgage, that may make a difference as to which path one might choose as being optimal.  And was the mortgage or second mortgage “purchase money,” or was cash taken out of the home when last refinanced?  These and other related questions can matter a lot, because depending on the state some is in… and the timing… there may be tax consequences… or deficiency judgements, and Lord only knows what else having to do with seconds, thirds, and the like.

 

• Is your loan owned by Fannie Mae or Freddie Mac?  It’s important, because loans owned by Fannie Mae or Freddie Mac follow different guidelines, one of which is that no principal reductions are offered.  And, how far behind you are can matter to Fannie and Freddie more than others as well.  In fact, in general, who services your loan, and who owns it can both be important factors when trying to decide which of the seven available paths is best for you.  For example, HSBC, I think everyone will tell you, doesn’t really modify, they’re more likely to forebear, meaning they may stick your late payments into your loan and let you repay them over some period of time.  And Wells Fargo is legendary in terms of being, let’s just say… difficult.  There are lots of things to have learned over the last four years if you were paying attention.

 

• I’ve been told that filing a Chapter 13 bankruptcy may provide you with the ability to “strip a second,” but bankruptcy is a technical area of the law, and one must qualify under very specific federal guidelines and then follow a myriad of rules.  And there are risks, including being charged with bankruptcy fraud, so it’s not something to guess at, in my opinion.

 

• How far underwater is the borrower, if at all?  Might the borrower qualify for refinancing under HARP, or any of the other available programs?  And what are the borrower’s expectations for future real estate appreciation?  From 1900 to 2012, homes appreciated on average 3.1 percent per year in this country.  So, if a home’s value dropped by 50 percent, that means it will have to appreciate by 100 percent before you break even.  At the average rate of 3.1 percent… that will take 24 years.  So, if someone is figuring on 5-7 years before prices “come back,” well, maybe not so much, and knowing that may or may not impact their decision making.

 

• There are many people trying to convince homeowners to sue their lenders or servicers for one thing or another… you hear the word “fraud” bandied about in this regard, and often by those who are in the business of helping people do just that… sue their banks or related parties.  The truth would have to be that depending on the specific facts involved, some maybe should… and others probably shouldn’t.  And regardless of what your facts are, you need to consider what your financial situation looks like?  Suing a giant financial institutions is NEVER CHEAP, QUICK OR EASY… and there is NEVER any sort of guarantee that you’ll win and it could take years and that will take a toll on most people, financially and otherwise.  Not everyone has the right genetic make-up or the financial resources for long-term litigation… and it probably shouldn’t be anyone’s first choice.

 

• What is your mental state and what are your concerns about the future?  Sometimes our minds can overestimate how bad something will be, and sometimes the reverse is true.  Before proceeding down a path, people need accurate information to prevent them from making a decision based on incorrect assumptions.

 

• And what about the question of qualifying for a loan modification, because as anyone who has gone through it attest, it’s not exactly an intuitive process, meaning borrowers can’t figure it out on their own using a handy kitchen calculator or anything like that.  The question of whether a borrower is likely to qualify for a loan modification is also not something that can be determined in an hour or two, but it’s important that it be done because borrowers who don’t qualify should be told that before they apply.

 

Okay, have I made my point?  I’m not saying that’s how things have been handled in the past by most lawyers offering to help with loan modifications, I’m saying that’s how the process SHOULD be handled.

It should be obvious that ideally borrowers would be able to gain a reasonable understanding of how all of the issues above relate to their specific facts and personal situations before deciding on which path to take to avoid foreclosure.  In reality, it’s critical that they do, because if the wrong path is chosen borrowers may find, upon realizing their error, that some of the alternatives are no longer available to them.

It should be just as obvious that ONLY an experienced attorney can be relied upon to provide advice on issues that include deficiency judgements, bankruptcy, litigation and more. I’ve personally spoken with dozens of homeowners who discovered too late that they had been misinformed and were on the wrong path, and there are few things sadder than to see someone lose a home that way.

And lastly, we should have all learned this past year, if we didn’t already know it, that servicers are capable of taking advantage of homeowners in the foreclosure process.  Were that not the case, we wouldn’t have seen the $25 Billion National Mortgage Settlement come to pass, and it wouldn’t have included two hundred pages of new servicer standards.  In California, those standards have been codified into state law under the Homeowner Bill of Rights, which takes effect on January 1, 2013.

So, with all of that in mind, how could anyone quickly dismiss the idea that you need real legal advice when deciding on how to avoid foreclosure or whether to apply for a loan modification?  At the very least, anyone who says that, the State Bar of California included, is oversimplifying things.

The fact that there are many at the California State Bar that think lawyers should not be involved in loan modifications can only mean what I said at the very beginning of this article: They haven’t taken the time to fully understand the process or the options involved.  And as a result, they don’t even know enough to know what they don’t know.

 

The unintended consequences of the State Bar’s handling of issues related to loan modifications is now actually increasing the likelihood that homeowners in California will be scammed and lose their homes as a result.

 

Three years ago, California passed a law known as SB 94 to prohibit the charging of advance fees in conjunction with providing loan modification services.

It was a knee jerk kind of reaction… there were certainly a lot of scams out there… certainly still are a lot of scams out there… and the legislature wanted to at least appear to be doing something about the problems.

It was proposed by Senator Ron Calderon, then Chair of the Senate Banking Committee, and if you want my personal opinion, I think the mortgage bankers supported the bill because, whether ripped off or not, they didn’t like hearing that homeowners were writing checks to anyone but them.

Of course, a law prohibiting advance fees for loan modification services wasn’t likely to stop scammers.  Good Lord… scammers don’t follow laws… that’s why we call them scammers.  We already had plenty of laws on the books that made defrauding homeowners illegal (unless you’re a mortgage banker in which case it’s only illegal under very limited circumstances and only for short periods of time), but it was happening every day all over the country nonetheless… and still is today for that matter.

For the first two years after SB 94 became law, the State Bar said almost nothing about it, and lawyers were able to practice within the rules established by the new law, or so they thought.  Last year, for some reason, the State Bar started handling things much differently, and now because of a decision in the Taylor Case by the State Bar’s Review Department, which is the Bar’s version of an appeals court… if you want legal advice and assistance related to getting your loan modified, the most dangerous thing you can do is look for an attorney to help you.

Now, if you try to find a lawyer to help you get your loan modified that is complying with the State Bar’s interpretation of the law in California, you won’t be able to find one.  I tried it yesterday afternoon for a couple hours and couldn’t do it.

The State Bar’s absolutely schizophrenic interpreting and erratic enforcement of SB 94 has scared all of the legitimate lawyers away from offering to help homeowners with loan modifications.  What you’ll have no trouble finding are scams… and those operating illegally.  Be careful though, because should they end up shut down by the Bar while handling your loan modification, you’ll be out a few grand and back to contacting your bank directly.

Unintentional or not, that dangerous environment is the fault of the State Bar of California and no one else.  They should really be ashamed because it’s their unwillingness to learn about the subject that is now causing innocent people to be harmed, and some to lose homes unnecessarily.  I don’t know how many, and I don’t care… even one is too many.

 

What has our Attorney General or Governor said about SB 94?  The answer will surprise you and the State Bar Doesn’t Seem to Care.

 

What’s even harder to understand is that the State Bar’s most recent interpretation of SB 94 completely  disagrees with how California Attorney General Harris and Governor Brown interpreted the law in documents filed with the court last year when they were defendants in a lawsuit brought by California homeowner, Christopher Duenas.

Here are links to the Motion to Dismiss and Reply Brief filed in DUENAS on behalf of Attorney General Harris and Governor Brown.  Throughout both documents you will find the AG’s and Governor’s interpretation of SB 94 as it applies to lawyers in Civil Code 2944.7(a), including where the law does and does not apply, but for example in the Motion to Dismiss…

 

Bottom of PAGE 10 & top of PAGE 11 

“… the fee provision of Civil Code section 2944.7 does not even appear to apply to the attorney consultation that plaintiff alleges he wants in his complaint, e.g., (1) evaluation of his mortgage, (2) evaluation of the extent of his rights against his mortgagor, (3) evaluation of consequences of breach of the mortgage contract, and (4) evaluation of need for a loan modification. None of these activities are covered by the challenged law.” (Emphasis added.)

“The legislative history makes it very clear that the ONLY SERVICE SUBJECT TO THE FEE RESTRICTION IN CIVIL CODE SECTION 2944.7 is the actual performance of an agreed mortgage loan modification or other form of mortgage loan forbearance with the borrower’s lender.”  (Emphasis added.)

“Senate Bill 94 prohibits charging of advance fees by persons offering to perform loan modification from ‘the institution servicing that borrower’s residential mortgage loan.’”

 

Bottom of PAGE 14 & top of PAGE 15

… the statute is narrowly drawn such that a person of ordinary intelligence will understand the attorney work that is the subject of the fee restriction. A person of ordinary intelligence is surely capable of determining that the statute prohibits an attorney from charging or receiving an advance fee for the performance of a mortgage loan modification or other loan forbearance with a borrower’s lender, and nothing else.

The breadth of the statute is also self-limiting in that it applies to “each and every service the person contracted to perform or represented that he or she would perform.” Civ. Code, § 2944.7(a)(1). Thus, if an attorney contacts to perform a loan modification, that is the scope of work subject to the fee restriction provision of Civil Code section 2944.7. 

… so long as the attorney has not contracted to perform an actual loan modification with the borrower’s lender as part of his representation in the court proceeding, the fee restriction in Civil Code section 2944.7, by its very terms, would not apply. What the statute does explicitly prohibit, however, is the payment of fees to a lawyer hired to perform an actual loan modification service with the borrower’s lender before the service is completed. That is the activity that triggers the fee restriction. This is a common sense and straightforward interpretation of the words of the statute. Therefore, as a matter of law, the statute is not impermissibly vague. 

 

Well, that sure explains a lot, because that’s precisely what has been missing in every discussion about SB 94 at the State Bar for the last four years… COMMON SENSE.  (Emphasis added, but nowhere near enough.)

Here’s a quote from the Reply Brief filed on behalf of Governor Brown and AG Harris in DUENAS…

 

“Duenas is free to consult with an attorney in all the areas he seeks, and he is free to pay the attorney in advance of receiving the advice if that is the fee arrangement he negotiates.”

 

AG Harris also points out in Duenas that SB 94 doesn’t limit the fees lawyers may charge homeowners and even says that nothing in SB 94 prohibits a lawyer from billing hourly for services.  ‘

What the Attorney General and Governor of California are pointing out is that you cannot “negotiate or arrange” or attempt to do either of those things, much less “perform a loan modification or mortgage loan forbearance,”  UNTIL YOU’VE APPLIED for a loan modification or other mortgage loan forbearance, because you cannot “negotiate” alone or arrange to change the terms of a loan by yourself.

So, as long as a lawyer has not contracted to “negotiate, arrange or perform” a loan modification or other forbearance, until there’s a lender or servicer in the picture SB 94 doesn’t apply and lawyers are free to charge and collect fees for other services as they see fit.  Once the negotiating, arranging and performing with the lender begins, then Civil Code 2944.7(a) applies and lawyers cannot be paid for these services until they’ve been completed, according to California’s Attorney General and Governor.

 

Now, I know what some of the lawyers reading this are thinking: “So what, Mandelman… that may be what the Attorney General and Governor think about SB 94, but that doesn’t change a thing as far as the State Bar is concerned.”  (Was I right?  I know… spooky, right?)

 

Well, I kinda’ figured that’s what you’d be thinking because I kinda’ left out one teensy tiny little fact about the DUENAS case when I was describing it earlier… the Attorney General and Governor weren’t the only defendants in that case.  No they were not… Si, es verdad.

No they were not… the California State Bar was also named in DUENAS, and so the State Bar’s Executive Director Joseph Dunn and then Chief Trial Counsel, James Towery filed their own motions with the court, and since I had a feeling someone just might want to see how the State Bar interpreted SB 94 in their Motion to Dismiss filed in DUENAS, there’s the link… and you’re welcome… but here are a few highlights that, if you’ve read the Bar’s Taylor Decision (link above), you should be shocked to read…

 

Based on it’s plain language, Section 2944.7 (a) is limited: it prevents any person, including an attorney from charging a borrower for negotiating, arranging or performing a loan modification until the service, that is the negotiating, arranging or performing is complete.  Civil Code 2944.7(a)(1) (Emphasis supplied.)  And then… “(2944.7(a) merely limits the timing of compensation for certain services; namely negotiating, arranging or performing a loan modification.”

 

Now please read the following statements made by the State Bar in the same Motion to Dismiss DUENAS… and if you can explain to me how it’s possible that what’s going on is going on, I’ll be forever in your debt.

 

Despite Civil Code Section 2944.7(a’s) application to ONLY NEGOTIATION, ARRANGEMENT, OR PERFORMANCE of a loan modification, (plaintiff’s) counsel INEXPLICABLY CONCLUDED that Section 2944.7(a) prohibits them from providing Plaintiff with his requested advice. (Emphasis supplied.) (RJN, Ex 7, at 2:7-10).

Although plaintiff does not explain his reasoning, it appears he believes that the statute prohibits the payment for ANY mortgage related service, not just the negotiation, arrangement or performance of a loan modification, until ALL such services are complete… Plaintiff’s theory is not supported by the plain language of the statute…”

 

Go ahead… start explaining.  Because all I could think of to say after reading that for the first time was… WTF.  And then I needed to take a nap.

 

The issue, of course, is that the State Bar’s latest interpretation of SB 94 in the Taylor Case, is so broad and sweeping, that if it is allowed to remain the law applying to lawyers in California, any lawyer that helps someone with a loan modification, or even anything related to a loan modification, can’t be paid for ANY of their work until “the end of the process,” whenever that might be.  No legitimate attorneys will work that way, I’ve spoken with hundreds and all anyone needs to do to is try to find one… like, today.

How about this for a proposition… You go online or however you want to search, and try to find a lawyer offering to help get loans modified that’s compliant with the State Bar’s unbelievably draconian and wholly inappropriate interpretation in the Taylor case, and every time you find one I’ll pay you $100.  Every time you get scammed, you pay me $100.  Anyone interested in taking that deal?

 

When is the end of the process?

 

It’s also worth noting that the State Bar’s current position does not make clear when they think “the end of the process” actually occurs, so for the moment I am making the assumption that it would be upon the approval of a trial modification by the lender or servicer, even though that moment in the loan modification process strikes me as a terrible time for a lawyer to stop representing a borrower.

On countless occasions, borrowers who had fulfilled their obligations under a trial modification agreement and been led to believe by their lender or servicer that the paperwork related to their permanent modification was quite literally in the mail, only to discover that their homes were sold days later… and no permanent modification would be forthcoming as promised.

I can’t even list the number of things I’ve seen go wrong at the trial modification phase here… doing so could easily be the sole subject of an entire book.  And yet, it wouldn’t seem fair to consider the end of the process the point at which a permanent modification were granted, because it’s not up the attorney’s fault if trial payments aren’t made as agreed.

Just a few months ago, I wrote about one of the State Bar’s prosecutors being asked during a pre-trial settlement conference exactly what the Bar considered “the end of the process.”  Was it at the point that a trial modification was granted by a lender or servicer?

The prosecutor replied, “As I understand it, they don’t even do trial modifications anymore,” which as ANYONE with even a cursory amount of knowledge of the loan modification process would tell you, is another way of saying, “Actually, I know NOTHING about what’s involved in the process of getting a loan modified.”

“And thank you very much for playing… I believe we have some lovely parting gifts…”

 

In Conclusion… 

 

Suzan Anderson, who until this year was the supervising trial counsel of the California State Bar’s special team on loan modification has defended SB 94’s restriction on lawyers being paid by using an analogy that could not be less appropriate.

She compared lawyers waiting to be paid when helping a homeowner with a loan modification to lawyers that wait to be paid when representing clients on a contingency basis, as is the norm in personal injury and medical malpractice cases.  I guess she could be right… if the personal injury lawyer’s client was victimized by a someone whose insurance company was bankrupt, mob-owned, and headquartered in Kazakhstan.

People at risk of foreclosure are enduring a financial hardship by definition.  Why does anyone think that attorneys will represent someone for a year and then hope to be paid, especially when that person may have to file bankruptcy along the way… and besides if they don’t pay their bill, what’s a lawyer to do… sue them?

But, more importantly, it’s not what the law says.  In DUENAS, the Attorney General says that she doesn’t think SB 94 will prevent lawyers from representing homeowners, and I agree with her completely… as long as we get to follow her’s and the governor’s interpretation of what SB 94 allows and doesn’t.

Right now, we’re not doing that.  Right now we’re in a state of confusion, and there are no attorneys to be found offering to help with loan modifications.

 

What will be done about this?

 

I don’t know… maybe nothing, believe it or not. I mean, it’s not like our state or federal governments are doing all that much to help homeowners losing homes to foreclosure in general, right?  So, whose in charge of fixing this so that people who can’t pay their mortgage payments can get legal advice if they want it?  My guess would be: No one, that’s who.

It’s sort of like prison rape.  Our Constitution doesn’t allow for cruel or unusual punishment, if I’m not mistaken, and I would think gang-rape would fall under the definition of “cruel” if not “unusual” punishment.   But it doesn’t matter… no one does anything about it because no one cares what happens to prison inmates.  You know what they say… how did that theme song from Baretta go again?  Don’t do the crime if you can’t enjoy the time (being gang-raped in the shower?)  Something like that…

It may just be that the lives of another five million American families have been tossed on the foreclosure heap… before enough people speak out and demand that things be changed.  As of now… people losing their homes are ashamed… they don’t want anyone to know what their going through.  The State Bar only hears about the people that got ripped off and whose homes were not saved as a result.  The successes don’t call the State Bar to compliment their attorneys.

 

If you care about homeowners being able to get legal representation if they think they need it… if you think this confusion over SB 94 is unacceptable… if you’re tired of the banking lobby getting involved in deciding when you can and when you can’t have a lawyer representing you… write to the State Bar’s Executive Director, Joseph Dunn.  Let’s be heard on this…  

joseph.dunn@calbar.ca.gov

 

While she was still in her position at the State Bar, Ms. Anderson was also been quoted as acknowledging that it is… “a very problematical situation.”

Problematical?  The woman is trying to kill me, I swear to God… it’s a problematical situization?  Is that a factoid?  I think for all intensive purposes there’s the detriment potentiality that her problematical is grammaratorical in nature… okay look… stop… just kill me now.

She also told a reporter for an article in the New York Times who was asking about SB 94’s impact… “I wish the law had worked,” Ms. Anderson said.

Well, heck-fire… me too, Suzy-Q.  But, I guess it was just too darn problematical.

Okay, that’s enough.  If you think it was a struggle to read, you should try writing it… makes one consider the rarely discussed benefits of a partial lobotomy.  I’m not talking about a vegetative state, just say dim enough not to notice what’s going on all around me, but still smile at my daughter, have a closet full of track suits, and crave butterscotch pudding.

Stay tuned… I’m not done with this just yet.  More to come…

Mandelman out.