Returning Home From Speaking at the ABAs Consumer Financial Services Conference on Loan Modifications


It’s only been a few days since I returned home from speaking at a conference held by the American Bar Association Consumer Financial Services Committee held in Park City, Utah.  This year’s conference was focused on the foreclosure crisis and loan modifications, and I was invited to be a speaker participating on a panel that included other attorneys with various expertise and Tom Pahl of the Federal Trade Commission (FTC) who is involved in enforcement actions against loan modification scams, among other things.

Mortgage banking compliance attorney Julie Greenfield, who has become a close friend, was also on the panel, and she delivered a compelling talk on why forensic loan audits are often not delivering any value to the homeowners who purchase them.  Julie also voiced her displeasure at how the new law, created by California’s SB 94 bill, restricts attorneys representing homeowners at risk of foreclosure by disallowing them from accepting client funds into a trust account in advance of work being completed.  Julie’s an expert in areas like Truth in Lending and RESPA, and has worked as in-house counsel for institutions ranging from Lehman Bros. to Option One.

Tom Pahl of the FTC spoke about all of the companies that have scammed homeowners over the past year or two by promising to obtain loan modifications.  I took notes as he spoke, preparing to fire back with both barrels, because as soon as he was done it was to be my turn and I wanted to make sure I refuted each and every point he had raised.  From Tom’s perspective, essentially everyone offering loan modification services is a “scammer” to some degree.  As I wrote down much of what he was saying, I couldn’t wait for my turn so I could let him have it.


The thing is, I came away from the meeting feeling differently about Tom Pahl and the FTC.  They weren’t bad guys out to destroy the legitimate law firms that were helping homeowners.  They were charged with protecting consumers and the proliferation of loan modification scams had become quite the problem over the last two years.  Seeing scam and after scam, and with no way to tell the good from the bad, the FTC had been leaning towards simply eliminating advance fees across the board.  At least that would accomplish something, and that something, you would have to think, would protect homeowners to some degree.

After talking with Tom and another FTC investigator, Joe Winston, I started to realize that these guys have a very difficult job.  When I was finished speaking… okay, ranting… Tom went back to the microphone and told the group he wanted a rebuttal.  Pretending to be Alan Shore on Boston Legal, I said, “I object… there’s no rebuttal… why does he get a rebuttal?  I wasn’t told anything about a rebuttal.”  People laughed.

I’m not trying to be conceited, but I do recognize that when it comes to speaking in front of a large room filled with several hundred people, I can be a tough act to follow.  It’s not that I’m necessarily better than anyone else, but I do tend to get quite a few laughs.  So, if the speaker that follows me isn’t at all funny, it can be quite the change of pace, shall we say.

Looking at me, but speaking to the large room of banking lawyers, Tom started out by saying, “I agree with almost everything Martin just said,” to which I replied just loudly enough for him to hear, “So, why did I drive to Utah if you could have done my part?”  And then speaking to the audience I said, “He’s not allowed to agree with me… why is he agreeing with me?”

“I agree with almost everything Martin said,” Tom was saying.  “But the problem we at the FTC have had is determining how to tell the good guys from the bad guys.”  He was looking at me like I was supposed to respond.

I thought about it for a couple of seconds, remembering how difficult it had been for me and my team to figure out the very same thing, as we were researching the subject of loan modifications over the past year, and I realized he was right.  “Fair enough,” I replied to his less-than-rhetorical query, “You’re right about that… it’s not an easy thing to do.”  Now I was agreeing with him?  This was deteriorating fast… what was I going to do next… start agreeing with Wells Fargo about something?  The thought made me vomit in my mouth just a little.

“I’ll have to think about that,” I said.  “I’ll have to think about how I can help in that regard.”  I had no idea how I would help in that regard, but he had me dead to rights, so I had to at least say that there might be some way to separate the wheat from the chaff on the loan modification playing field.

He knew he had me, so he couldn’t help but go for the knock out punch.  “How many legitimate attorneys that are helping homeowners with loan modifications do you know?”  I had to think about that for a moment.  “I don’t know, maybe 40 or 50?  Maybe even 60, 70?”  I didn’t like the way this discussion was headed one bit, but his point had been made… me knowing a relative handful of skilled and ethical lawyers was not going to solve what is clearly a national problem of mammoth proportion.

HUD simply did not have the bandwidth to handle the millions of homeowners that would need help in the years ahead.  During my talk, I had made fun of HUD’s counselors as an answer to the problem of homeowners needing help, not because they’re somehow a bad answer for some homeowners, but rather because there were so few of them.  In the most recent congressional accounting report it showed that HUD has helped roughly 880 homeowners this past year, so considering there were something north of 3 million foreclosures last year, HUD would require some time before it could be considered a solution to the crisis.  But it went without saying that my known 50-70 ethical attorneys wasn’t going to move the ball very far down the field either.

Score: Mandelman – 10… Tom Pahl of the FTC – 11?   Damn, I thought to myself, this guy’s good.  And besides, I like him… and his fellow FTC people as well.  Not what I expected, I have to say.  At the break, I felt like I’d better take a nap.

When Michael Goodman had first called me a couple of months back to invite me to come and speak to the cadre of bank attorneys, I had thought it would be a good opportunity to kick some banker butt and throw a couple of barbs towards the FTC.  But it wasn’t turning out that way, and I found myself wondering where we might all go for dinner later that day.  Yikes.

I’ve always recognized that I don’t get to meet many scammers.  After all, if Martin Andelman from Mandelman Matters calls, and you’re a scammer, chances are you don’t take the call.  Why would you?  My writing may not reach as many people as Paul Krugman of The New York Times, but in the loan modification and foreclosure crisis world, I’ve become quite well known, and being featured in an article written by me, in a less than positive light… well, let’s just say that it wouldn’t be desirable, and leave it at that.  In other words, if I call a scam operation, it’s “Tell him I’ll call him back,” and that’s that.

I realized that Tom, on the other hand, has the opposite issue.  Essentially, the only loan modification firms he sees are those at the bottom of the barrel in terms of compliance or complaints.  So, how could he possibly know how many legitimate operations there were in existence across the country, especially when you consider how hard it was for me to get to know the relatively small number I know today?

The answer is, he couldn’t.  I realized, from attending this meeting of bank attorneys and the FTC, that since borrowers don’t talk about lawyers having saved their homes from foreclosure, and since banks certainly aren’t in the business of disclosing which lawyers helped their borrowers… and since the private sector lawyers themselves don’t do anything to let the world know what’s going on… well, how would anyone know?

I concluded that I had seen the enemy… and it was the legitimate private sector lawyers themselves that have become the problem.  After spending the last year, joining in the bitchfest with the private sector attorneys who love to bemoan the fact that they’re being mistreated by the banks and by government regulators, what I saw at this conference changed my view 180 degrees.

If any private sector attorney thinks that he or she can practice autonomously, hidden away in a little box, pretending to exist under some sort of imaginary radar… and that somehow federal or state regulators are supposed to know that they’re practicing law in a legitimate and ethical fashion, delivering a great deal of value to their clients… well, that’s just terribly naïve, period.

As I left the conference to head home, there was no question in my mind that had I not been there, the conference would have discussed two things related to loan modifications: the inadequacy of borrowers and the scammers offering to help negotiate loan modifications.  Because I was there, in my opinion, and spoke of my experiences with lawyers who have helped countless numbers of homeowners with their loan modifications, the debate changed to some significant degree to include the legitimate private sector attorneys that now had to be acknowledged as existing, although they could still not be seen or heard.

Talking with Tom Pahl later that morning, I learned that, as I suspected would happen, congress had decided to turn the topic of loan modifications over to the FTC to make federal rules, and that those rules were to be finalized by June 1, 2010.

You see, there were two legislative proposals in congressional committee that pretty much mirrored the two bills that California debated this past year, SB 94 and AB 764, one proposed by Barney Frank (D-MA) and the other by Doris Matsui (D-CA).  But I’d heard some time ago that congress would not be pursuing the issue of regulating loan modifications as a legislative matter, but rather they would turn the job over to the FTC who would make federal rules.

Talking to Tom, it became abundantly clear to me that the FTC rules committee, left to its own devices and absent any data or even any argument to the contrary, would be certain to focus on the wholesale elimination of advance fees when creating the new rules, at the very least.  It made sense.  What else could they possibly do?  Invent a rationale to protect legitimate private sector attorneys that they couldn’t see, hadn’t heard from, and therefore wouldn’t have anyway of knowing were even there?  Probably not.

As I said to those who attended the conference, the foreclosure crisis in this country is a tragedy beyond anything I’ve seen in my lifetime, and it is far from over… in fact, more accurately, it has only just begun.  Forecasts by Goldman Sachs show 14 million foreclosures over the next three years, others show 17 million over the next five.


What would this country look like after experiencing four, five, six, or even ten times the number of foreclosures we’ve seen in the last few years?  The thought is one I’ve contemplated hundreds of times since the crisis began.

In fact, I’ve read several books on the Great Depression over the last year, in an effort to try to understand how this nation’s citizenry responded during the last tsunami of foreclosures, and what I’ve learned is at the very least reason to pause, if not sound an alarm.


In February 1933, the Iowa Legislature attempted to calm widespread violence in rural Iowa by stopping banks from foreclosing on farms whose owners were unable to pay their mortgages.  The constitutionality of that law was scheduled to be challenged in Judge Bradley’s court in Le Mars, Iowa on April 27, 1933, but before any arguments could be presented, the judge was charged by more than 100 men in his courtroom.

According to accounts from “A Judge and a Rope” (by George Mills, 1994), “A History of Iowa” (by Leland L. Sage, 1979) and the Chicago Tribune, in the days following the event:

… Bradley was dragged from the Plymouth County courthouse and refused repeated demands to ignore foreclosure edicts. He was surrounded by an angry and violent mob.  In that public square, he was struck in the face and fell to his knees. The crowd demanded that he agree to stop signing foreclosures, but he refused to disobey his office.

Roughly, the judge was hauled by the mob into the back of a truck and blindfolded. The crowd would be thinned by a change of locale, but unfortunately for the judge, the terror was multiplied.  Dumped a half-mile outside of town, he had a noose placed around his neck. The rope was tossed over an electric light pole, tightened and for an instant the judge was lifted off the ground by his neck.

Again he was asked not to sign foreclosures on farms and this time when he refused his pants were removed, smeared with grease and filled with dirt and gravel.  The 54-year-old judge was crowned with a greasy hubcap and told to get on his knees and pray. Aloud he prayed, “Oh, Lord, I pray thee, do justice to all men.”

Miraculously, this brave prayer seemed to break the will of the mob, and some of the masked men who held the rope got in a car and drove away.

While walking back to town, he was picked up by Rev. J.J. Depree who drove the judge the rest of the way back to town. Judge Charles Bradley escaped with only minor injuries and the need for a wash-up and a change of clothes.

Will this time be any different?  Why would it be?  Are we a more reasoned people?  It is so difficult to imagine that we are not?  Are we any less violent today than we were in 1933?  Or are we doomed to repeat the ways of our past?


I can’t answer any of those questions with any more certainty than anyone else.  I really do not know.  What I do know, however, is that millions of Americans will need to turn to this country’s lawyers to help them navigate through the worsening economic situation in which we all find ourselves.

It’s not just about loan modifications; it’s about needing advice and representation in order to make the best out of an absolutely horrific situation.  On one end of that spectrum is bankruptcy, on the other might be litigation.  In the middle are loan modifications, short sales, strategic default, numerous debt management solutions, and things yet to be uncovered.  Only attorneys are capable of providing advice and representation on such a spectrum of issues, only attorneys can be depended upon to protect our rights.

For without lawyers, there is no law.  And even though there are alternatives when it comes to obtaining a loan modification, most notably telling people to contact their lender or servicer directly, it should be clear to anyone involved that without attorneys involved, we would be worse off… much worse off.

I’ve tried for the better part of a year to bring together the lawyers and senior management professionals that are working to help homeowners, but to-date I have failed to accomplish much more than loosely affiliate what amounts to little more than a handful of firms.  I’ve tried, with the resources available, to convey the risks of complacency, and I’ve tried to develop and present compelling arguments for firms to publish data, and provide visual evidence of their contributions to our society and the value they’ve delivered to some many tens of thousands of homeowners.  But again, to-date I have not been successful… or at least nowhere near successful enough.

Do I think I could be instrumental in affecting what I believe to be necessary and positive change?  Unquestionably, I do.  But not alone, and not with a handful of even thirty or forty supporters.  What we face is a national problem and it requires a solution capable of delivering representation and support on a national scale.

I don’t mean to sound defeatist.  It is neither my nature or my perspective.  But time is now against us, and with only five months remaining before the FTC issues its rules that will govern loan modifications in this country, if private sector attorneys and other professionals are to be considered, we must continue whatever momentum we have created and bring others into the fold quickly.

It remains to be seen as to whether my efforts to rally consumer attorneys and other professionals that represent homeowners to support a united voice, and document the importance of their contribution, but it will not be long before we’ll know the outcome of those efforts, for soon the decision will be made without anyone’s vote.

For my part, I still hold out hope and believe there is no more important fight before us.  I continue to try to push forward because should I fail, I want to know that I did all I could.  And while no one can know the outcome of such efforts with certainty, for my part I would offer that: Today is a good day to die.


Lastly, I’d just like to thank the American Bar Association Committee on Consumer Financial Services for having me at the conference in Park City, Utah this year.  I learned a great deal, and hope I provided something to those in attendance as well.

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