BREAKING NEWS! CA STATE BAR PUBLISHES GUIDANCE FOR LAW FIRMS ON SB 94
Wading through ambiguities in language in order to interpret the legislative intent of a new law isn’t easy, but the moral of the story is that it can be done, and thanks to the combined efforts of the attorneys and other great minds that make up the Commission on Homeowner Representation, it can be done successfully. Reading the California State Bar’s written guidance related to law firms representing homeowners seeking loan modifications, which was published online by the Bar today, provides proof that this statement is true.
The State Bar’s WRITTEN GUIDANCE DOES NOT PROHIBIT LAWYERS FROM BREAKING UP SERVICES RELATED TO A LOAN MODIFICATION INTO CONTRACTUAL SEGMENTS, PAID FOR AS THOSE SERVICES ARE COMPLETED.
HOWEVER, the Bar’s interpretation of the new law DOES NOT allow attorneys to accept funds in advance into a trust account and be paid from that trust account. The Bar focused on the word “receive” in the language contained in the statute as the basis for their interpretation, stating:
The legislation prohibits the collection of advance fees for loan modifications, as specified. Among other provisions, new Civil Code Section 2944.7(a)(1) provides as follows:
“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.”
Here’s a link to the Bar’s written guidance on SB 94:
http://calbar.ca.gov/calbar/pdfs/ethics/Ethics-SB94-FAQs.pdf
Whether the Bar’s interpretation of the trust account issue would be upheld by the courts is unknown, however, I think the salient point is clearly that the manner in which most if not all of the law firms that make up the Commission on Homeowner Representation have chosen to operate under SB 94 can now be assumed to be State Bar compliant under the new law.
And that’s a good thing. A very good thing. Because lawyers who help homeowners avoid foreclosure have a tough enough job these days fighting the banks and servicers who continue to refuse to follow rules and even laws… and they certainly don’t need to fight the State of California or State Bar as well.
Congratulations to all involved and thank you to the California State Bar for providing the written guidance as soon as was possible.
