California State Bar Court Lacks Fundamental Knowledge of Loan Modifications



When it comes to the subject of getting one’s mortgage modified, very few actual “experts” exist.  This undoubtedly seems an unlikely truth to many people, which only serves to further illustrate my point.

There are millions of homeowners who have experience dealing with their own loans and respective servicers, but as any true expert in the subject would readily tell you, there’s nothing consistent about the process of getting a loan modified.  Not only do things change over time and between servicers, but the fact is, every single loan modification is a snowflake… there are no two that are exactly alike.

There are precious few in government who would claim to have studied the subject, and a small group who have been involved in helping thousands of homeowners through the process over the last four years.  And even these individuals are often missing key perspective or current information.

I do understand why this is the case, and it’s truly a fascinating dynamic, but it doesn’t change the fact that today it is inexcusable for anyone in policy, regulatory or leadership positions to lack even rudimentary  knowledge of something that is so significantly impacting the lives of millions of American families.

Inexcusable, and yet my research and extensive experience establishes that without question, this is far too often the case and the result is both tragic and costly to us all.

The area that seems to be least understood centers around the question of whether homeowners applying for a loan modification require the assistance of an attorney.  The obvious answer would seem to be that it’s up to the individual homeowner, but in California at least, the state’s legislature and bar association is involved.

On numerous occasions over the last year, I’ve had the opportunity to see the California Bar Association’s inexperience related to loan modifications up close, and now that lack of knowledge is threatening to cause even more harm to the people of California than it already has. I’ve seen state bar prosecutors and even state bar judges that know almost nothing about the subject of loan modifications, and yet they are charged with regulating the legal profession as related to lawyers providing loan modification services.

What could possibly go wrong?

In point of fact, the State Bar’s so-called interpretation of a California law incredibly may soon prevent homeowners from hiring a lawyer to assist with a loan modification even if they want one.

There have no doubt been a hundred thousand homeowners in California alone who have engaged the services of an attorney in order to get their loan modified, and perhaps more than that, but you won’t hear from them or ever know who they are.  They never told a soul that they were having trouble paying their mortgage, and they certainly didn’t tell anyone when a lawyer succeeded in getting their loan modified.  But that doesn’t mean they’re not out there, in fact they’re quite likely your neighbors.

I know this to be true, as I’ve personally communicated with literally thousands of them over the last four years, and I continue to do so on a daily basis today.

I should mention that I have also communicated regularly with hundreds of attorneys involved in foreclosure defense, bankruptcy and loan modifications during that same time frame and today, and this past year I’ve had the opportunity to see how servicers handle loan modifications and how elected representatives in several state legislatures think about the topic.

California’s Response to Scams…

In October of 2009, California’s governor signed into law a bill known as SB 94.  The new law precluded attorneys and Department of Real Estate (“DRE”) licensees from charging advance fees when providing loan modification services.  The impetus for the bill was obvious… distressed homeowners at risk of losing homes to foreclosure were getting ripped off by companies claiming to be able to save their homes.


That much was clear, but not much else.  In a bit of a knee-jerk reaction, and recognizing that there was no all-encompassing solution available, politicians responded with a bill making advance fees illegal, and in truth they did a good job… SB 94 as written was actually very well crafted.


You could say that it hasn’t worked in the sense that scammers haven’t stopped scamming, but while that’s certainly true, it doesn’t mean that the law hasn’t accomplished anything.  For example, I’ve recently learned that there are many loan modification companies marketing services in every state but California, and that is a direct result of SB 94.


The problems associated with SB 94 haven’t been the result of the bill’s actual design, but rather from its implementation under the purview of the California State Bar Association.


Here’s how the advance fee prohibition was described in the legislative notes from the April 1, 2009 hearing held by the Chair of the Senate Committee on Banking, Finance and Insurance, Senator Ron Calderon, who sponsored the bill.


“This prohibition is intended to prevent persons from charging borrowers an up-front fee, providing limited services that fail to help the borrower, and leaving the borrower worse off than before he or she engaged the services of a loan modification consultant.”


I can’t think of anyone that would even try to make a credible case that those aren’t all laudable objectives.


To accomplish SB 94’s intended purpose, the legislation’s operative language was used verbatim to apply both to DRE licensees and attorneys.  In other words, the following section is duplicated word-for-word when applying to lawyers or DRE licensees.


“… 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:


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.


(You can find that language in Business & Professions Code Section 10085.6, which applies to DRE licensees, and California Civil Code Section 2944.7 (1), which applies to attorneys licensed to practice law in California.  And it’s important to note that it is IDENTICAL LANGUAGE in both places.)


However, as applied to DRE licensees, SB 94 went a step further by amending B&P 10026, to specifically and exclusively prohibit real estate and mortgage professionals from breaking up the services related to a loan modification.


10026. The term “advance fee” as used in this part is a fee, regardless of the form, claimed, demanded, charged, received, or collected by a licensee from a principal before fully completing each and every service the licensee contracted to perform, or represented would be performed. Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section.


The applicable sections of California’s Business and Professions Code are found in Division 4 of the code, which applies ONLY to real estate licensees and NOT to attorneys. And, B&P Code Section 100116 defines “licensee” as “a person, whether broker or salesman, licensed under any of the provisions of this part.”


The last sentence in B&P 10026 makes clear that a DRE licensee offering to provide loan modification services, is not permitted to view those services as individual components, rather they must view the loan modification as a single service and therefore cannot be paid until that service has been completed.


The drafters of SB 94, however, chose not to limit attorneys in that way, as there is no corresponding language in the legislation that seeks to do so.


Obviously, the drafters of the bill were aware of this issue because they prohibited DRE licensees from breaking up services or fees into component parts.  The legislative committee chose not to include language that would prohibit lawyers from doing the same.


Therefore, it would seem obvious that a lawyer can, under SB 94, be paid AFTER he or she has “fully performed each and every service the person contracted to perform,” regardless of whether at the “end of the process” or not.


For example, under SB 94 a lawyer could contract to deliver services A, B, C & D… and only once those services were fully completed to the client’s satisfaction… could the lawyer be paid for the those services as agreed, within established ethical boundaries of unconscionable fees, et al.  After that, the lawyer could contract to provide services E, F, G & H… and only after those services were fully completed, could he or she receive payment as agreed.


 No Advance Fees…


No one in California, or anywhere else in the country for that matter, is talking about advance fees anymore.  The FTC’s MARS Rule, which is the governing law in all states but California, allows a lawyer to accept money into his or her trust account and deduct funds as work is completed.  And that makes sense… do the work… then get paid for the work.  It’s a way of practicing law that’s gone on for a hundred years, or perhaps even longer.


The intent of SB 94 was to prevent homeowners from paying for services in advance and then not receiving them, so by only accepting payment for services that have been fully completed, it seems clear that a lawyer practicing in such a way would be in compliance with the law.


In point of fact, that is the methodology that lawyers have been working under since SB 94 became law, and the California State Bar has been more than aware of that fact.  Over the last two years, State Bar investigators have reviewed at least dozens of retainer agreements showing the breaking up of loan modification services and fees without comment.


In addition, literally hundreds of lawyers have contacted the State Bar asking for clarification on this point and yet for more than two years the State Bar declined to publish any sort of specific guidance in response… until this past fall when things inside the State Bar obviously changed.


Now, the State Bar in California is saying that lawyers should do the work… but not get paid until whenever the end of the process is… which is just like saying… work for months and hope someone pays you in a year… it’s never going to happen, no lawyer would ever agree to do it.  It effectively prevents a homeowner from hiring a lawyer if trying to save a home by getting a loan modified.


Of course, the State Bar SAYS it’s not trying to stop homeowners from hiring lawyers in this situation, but it’s obviously not true… that’s precisely what they are trying to do.  In fact, I’ve heard state bar prosecutors, judges and other executives opine that they didn’t believe that lawyers should be providing loan modification services to homeowners.


The California State Bar has formed an opinion based on almost no knowledge of the subject, that will harm hundreds of thousands of homeowners and increase the state’s budget deficit in the years ahead.


Only in California…


The California State Bar Association is unique in that it is the only state bar in the country that functions as both a regulatory agency and a trade association. California is the only state in the nation with independent judges dedicated to ruling on attorney discipline cases.


In reality, the State Bar has been under pressure by members of the state legislature for the past 25 years, with the accusations revolving around the State Bar being too lenient when disciplining attorneys.  But one need only look back to the November 2010 issue of the California Bar Journal to get a good solid feel for what’s been going on.


State Bar Task Force Moves to Address Legislative Criticism

A State Bar Board of Governors task force took steps last month to respond to legislative criticism that the bar may not be meeting its public protection mission.


“The legislature perceived that the bar was putting the interests of lawyers ahead of the interests of the public,” said bar President Bill Hebert, chair of the Task Force on Governance in the Public Interest.

Hebert went on to cite examples in which lawmakers were discerning a bias in favor of attorneys at the expense of the public.  To give you an idea of what went on, here are two of the examples her cited:

  • A Find Legal Help feature on the website that didn’t allow for searching by practice.
  • Opposition to a bill prohibiting attorneys from receiving upfront fees for loan modification services.

I think everyone would have to agree that is a very clear example of pressure by the state legislature.  But, examples in which lawmakers discern a bias in favor of attorneys at the expense of the public,” and the first on the list is, A Find Legal Help feature on the website that didn’t allow for searching by practice.”   That was seen as evidence of bias towards attorneys.


And then further down the list, Opposition to a bill prohibiting attorneys from receiving upfront fees for loan modification services.”


That item I found fascinating because the California State Bar supported SB 94.  In fact, during the summer of 2009, I was shocked that the State Bar would take the position they were taking, and now I know why they ultimately did… intense legislative pressure.  The California State Bar was harshly criticized by the state legislature for having a particular stance on a piece of legislation… and so they changed their minds and supported the bill.


Herbert was also quoted in the article as saying…


“We can either take steps as the bar’s board of governors to retain control of the State Bar as an arm of the Supreme Court or the legislature is going to make those decisions for us.”


So, the State Bar was actually threatened by the legislature to either support SB 94, or risk being stripped of its authority as a disciplinary agency.  That is wrong to the point of being scandalous.  If your vote can be mandated then you have no vote at all, right?  This is a judicial branch of government being coerced by the legislative branch. This is why the U.S. Constitution describes the separation of powers.


I had always wondered why the State Bar was taking their position on this issue.  Why would any bar association want to prevent a consumer from being able to hire a lawyer if that consumer wanted to do so?  Now I know the answer to that question.


Back in 2009, I started posing this question to numerous attorneys around the state and they all said that it’s because, in this specific instance, there’s a public protection component… in other words, the State Bar is doing what they’re doing to protect the public from being scammed.  But, here we are more than two years later and this argument simply doesn’t hold water, as they say.


According to the State Bar, in 2011 there were 2,500 cases considered for formal charges… the percentage that had anything to do with loan modifications represents fewer than 3 percent of that total. As you’ll see described in greater detail just below, during the more than two years since SB 94 became law, only 69 attorneys have been found deserving of some sort of discipline… and of those, only 18 have been disbarred.


Now, I am not saying that’s good news, by any means, but in a state with over 200,000 lawyers and two million homeowners in foreclosure or seriously delinquent, 69 lawyers being disciplined and 18 being disbarred does not seem to me to be an epidemic, nor does it seem adequate basis for supporting a law that you believe prevents homeowners from hiring attorneys to assist them in getting their loans modified in order to save their homes.


And it’s important to remember that no one is saying that lawyers should be paid in advance.  What is at issue is whether a lawyer can be paid AFTER he or she has completed the work that he or she has contracted to complete.  The law created by SB 94 says nothing about the lawyer having to wait until “the end of the process” to be paid.  The law says nothing about a lawyer not be able to break up the services related to a loan modification into component parts… only a DRE licensee is prohibited from doing that.


So, now we can see that the State Bar wasn’t originally supporting SB 94.  Only after the state legislature characterized the Bar’s opposition as being evidence that the Bar was “putting the interests of lawyers ahead of the interests of the public,”  did the State Bar support  the bill.


I recently spoke with an attorney who was a member of the California State Bar’s Board of Governors in 2009, as SB 94 was being introduced and the State Bar’s support was being coerced… I mean… requested.  He remembers the issue quite clearly as he was among those that opposed the bill as applied to lawyers.  His reasoning was identical to my own back then: It wasn’t necessary… ripping off a homeowner for thousands of dollars was already illegal.


That thinking proved to be true, by the way.  NONE of the 18 lawyers disbarred having to do with foreclosure avoidance were found to be violating SB 94.  The existing laws were apparently more than adequate for prosecuting bad guys.


If the State Bar or anyone else wants to protect consumers from being ripped off, the answer is to tell homeowners where they can go for legitimate assistance.  People only get scammed when they don’t know where to turn for legitimate… so they look online and get ripped off.  Of course, the standard line just keeps being repeated in that regard: Call your bank directly or call a HUD counselor.  And if either of those things worked, we wouldn’t be talking about this now.


In September of 2011, at the State Bar’s annual meeting, Suzan Anderson, the State Bar’s “supervisor and special prosecutor of the Special Team on Loan Modification Fraud,” appeared as a speaker at 8:00 AM on the first day to tell the lawyers in attendance that the State Bar would now be interpreting SB 94 to mean that a lawyer providing loan modification services could not be paid until “the end of the process,” although what that exactly means remains unclear.


It’s no secret that Suzan’s appearance was a reaction to members of the state legislature putting pressure on State Bar Executive Director Joseph Dunn to “clean up the backlog of attorney discipline investigations by year’s end.”


Dunn brought in Jayne Kim as the new interim OCTC, which stands for Office of the Chief Trial Counsel, and “THE RECORDER,” a leading news magazine for the legal profession, reported the story here: Zero Hour for the State Bar.  The January 6, 2012 article begins as follows…


“Jayne Kim’s mandate was clear.

Cut the California State Bar’s backlog of attorney discipline investigations. To zero. And do it in four months.

Legislators in Sacramento were hounding the Bar about the backlog. State Bar Executive Director Joseph Dunn recruited Kim from the U.S. attorney’s office in Los Angeles to get results on the long-standing problem.”


That was the beginning of the State Bar’s rush to close out the hundreds of cases in the backlog of investigations. It was also when the State Bar started using SB 94 as a ‘hammer’ with which to pressure lawyers into accepting a settlement without the need for any sort of trial or hearing, which would require a significant amount of time that the State Bar simply did not have.


The State Bar’s marching orders were clear and widely known… they were to ‘clean up the Bar’s backlog,’ in a hurry… and Jayne Kim was seen as the right prosecutor for the job.  Also from the January 6, 2012 article in THE RECORDER…


“But it’s difficult to get a clear picture of just what she’s achieved.


The Bar says the backlog is now at zero, but won’t provide a breakdown of how many of the resolved investigations actually led to disciplinary charges.


The Bar’s been faulted in the past for lack of clarity in reporting its backlog numbers. In one recent report, the Bureau of State Audits said the annual discipline reports needed to be more informative. The same report dinged the Bar for skewing results — because of a change in methodology, for example, the Bar reported that the time it takes to close investigations had decreased between 2004 and 2007, when in fact the average investigation time had increased by 34 days.


Kim gave a bigger-picture take on her office’s productivity last year: The Bar fielded close to 20,000 inquiries from the public in 2011, she said, and about 5,000 of those were deemed worthy of investigation. Of those, about half were dropped and the other half put up for consideration of formal charges.”


Those numbers are helpful when compared with the number of lawyers accused of some type of violation related to loan modifications.  According to the State Bar, they have “pursued disciplinary charges related to loan modification services involving about 153 attorneys.”


  • Of those, only 69 have been disciplined in some way, which includes anything from being required to attend an ethics class to a temporary suspension. 
  • Since 2009, 18 attorneys in California have been disbarred related to providing loan modification services.


While I would agree that any number of scammers is too many, those numbers simply do not justify an attempt to stop lawyers from representing homeowners trying to get their mortgages modified.


(On my podcast with David Cameron Carr, a former State Bar prosecutor (for 12 years) who is now an Ethics and Bar Defense lawyer practicing in San Diego, he describes what has been happening at the State Bar in very candid terms.)


The Basis for the State Bar’s “Interpretation”


The State Bar claims that its interpretation of  SB 94 is based on the words “each and every,” which are found both in California Civil Code 2944.7 and B&P Code 10085.6, as follows…


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.


I don’t want to appear overly critical here, but basing anything on the idiom or phrase, “each and every” is just not a well thought out position.


For one thing, as mentioned earlier, the language in 2944.7, which applies to attorneys, is IDENTICAL to the language found in B&P Code 10085.6, which applies to DRE licensees.  So, if “each and every” was intended to prevent someone from breaking up loan modification fees or services up into component parts, then why would the legislative committee have gone the step further and amended B&P Code 10026 to read…


Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section.


In other words, if B&P Code 10085.6 use of the words “each and every” already prohibited the breaking up of fees and services into component parts, then B&P Code 10026 is entirely redundant and wholly unnecessary.


The other problem with relying on “each and every” as the basis for the State Bar’s interpretation is that the use of “each and every” alone leaves an incomplete statement.  For example, it could say that you cannot be paid until you’ve completed each and every service involved in obtaining a loan modification.  It doesn’t say that, but it could have been written that way.


Or, it could say that a lawyer cannot be paid until he or she has completed each and every service required prior to the borrower being approved for a trial modification, and once again, it simply wasn’t written that way, but it certainly could have been.


Or, how about each and every service the client asks you to complete?  Or, each and every service deemed necessary by the servicer?


The idiom or phrase, “each and every” is merely used for emphasis.  In this instance one might just as easily have used “every” by itself, or even “all,” for example.


… until after the person has fully performed ALL of the services the person contracted to perform or represented that he or she would perform.


This “each and every” argument is nothing more than a transparent attempt to find words that can be argued support the State Bar’s forgone conclusion as to what the law should say… but simply does not say.


The State Bar used the same sort of logic when, shortly after SB 94 was signed by the governor in October 2009, it published its interpretation of the new law as it pertained to the use of trust accounts, which it said were not allowed under SB 94.


Consider the use of the word “compensation.”  Money placed into a client trust account is without question, not considered compensation… it is the client’s money, and lawyers get in trouble all the time for misappropriating these funds held in trust.


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.


The State Bar justified its interpretation that disallowed the use of client trust accounts by stating that it relied on the word “receive.”  One might reasonably ask the question, “receive what,” because “receive compensation” would seem to allow lawyers to accept a client’s funds into their client trust account and deduct them as earned.


More lawyers are disbarred or seriously disciplined as a result of trust account violations than anything else, and that’s because the money in trust is not the lawyer’s money.  Unless we’re talking about SB 94 and a loan modification in which case the State Bar chooses to focus on the word “receive?”


It’s also worth noting that in the other 49 states, the FTC’s Mortgage Assistance Relief Services, or MARS for short, governs lawyers and loan modification services, and it requires the use of client trust accounts.  Only in California do we prohibit the use of trust accounts and only when a lawyer is assisting a homeowner with a loan modification.


The State Bar’s Response…


In response to my articles and podcasts on this subject, the State Bar has recently gone even further by attempting to scare homeowners who are considering hiring a lawyer related to their loan modification by planting a story in the LA Daily News.  Here’s a link to my article covering the press release driven story, which does provide the Daily News story in its entirety: A New Low for the California State Bar, but to give you the flavor of what the article says, here are opening sentences from that Daily News story:


“Paulette Breen sensed something was wrong when her home loan modification made her mortgage payments more expensive.


Suspecting fraud, the Van Nuys resident hired a lawyer to sort things out.


That only made things worse.”


Please note that the woman whose story is featured obtained her loan modification on her own, without legal counsel, and only hired a lawyer when she was unhappy with the outcome she had been able to obtain on her own, and yet the story goes on to talk about SB 94 restrictions on advance fees, which had NOTHING to do with what happened in her case.


Two Things Are Now Clear…


There are two things that have recently become clear to and at a minimum they should make all lawyers feel insulted and all homeowners nothing short of enraged.


  1. The first is that the State Bar now clearly intends to succumb to pressure by the legislature by stopping lawyers from being able to assist homeowners related to loan modifications and even further, with their mortgages in general.
  2. And the second is that I have personal knowledge of the State Bar’s level of knowledge and understanding of the subject and it is rudimentary at best… in fact, it borders on total ignorance.


Last fall I was asked to testify at a State Bar hearing as an “expert witness,” and after being questioned by the prosecutor for almost an hour, and the court certifying me as an “expert” on subjects such as loan modifications and the foreclosure crisis, I went on to testify, but I could tell from looking at the faces of the judge, the prosecutor and even the defense attorney, that I was teaching more than testifying.  I got the distinct impression that many of the things that I was saying, they had never heard before.


Many lawyers have told me that State Bar prosecutors made clear that the State Bar’s interpretation of SB 94, doesn’t allow a lawyer to break up loan modification services into components and be paid as the work is finished.  The prosecutors have stated that lawyers “were not permitted to be paid until the end of the process.”   


When asked to define exactly when the “end of the process” actually was, however, no one at the State Bar really knows. Was it when the trial modification was denied for the first time, because that only signifies the first appeal, or was it when a permanent modification was granted, because that’s really dependent on the borrower making his or her trial payments on time?  Or how about when the servicer dual tracks a borrower and ends up unexpectedly foreclosing and selling the home right in the middle of the loan modification process?


On more than one occasion State Bar prosecutors have replied that they didn’t think banks were even doing trial modifications anymore.


Anyone familiar with the process of getting a loan modified already cringed at this reply coming from a State Bar prosecutor, because it is undeniable evidence that he knows nothing about the subject and yet is prosecuting lawyers for violating SB 94.  There are no two ways around that conclusion, as trial modifications are inseparable to the subject of loan modifications or payment terms under SB 94.


Similarly, State Bar judges have also made statements that are more than troubling.  More than one has said that in his opinion lawyers should not be allowed to provide loan modification services, or that lawyers should not be able to be paid until the end, although again, a definition of “the end” never seems to be offered.


One judge was quoted as having said…


“All I know is what is put in front of me and I just think lawyers should just stop taking on loan modifications.”


Everyone reading this needs to understand something here: The State Bar has NEVER put the controversial issues inherent to SB 94 on trial, so the judge making that statement has never had the benefit of hearing testimony or reviewing evidence related to the topic on which he opined during this settlement conference.


The judge’s views, therefore, were not well founded, rather it’s clear that they could only have formed as a result of some extremely limited experience, or more likely they’d been influenced by State Bar prosecutors, which constitutes a real life example of the blind leading the blind.


Now, let me be blunt… I am not really criticizing State Bar judges or prosecutors.  I understand that they know so little about loan modifications that they don’t even realize the damage their views could cause.  I testified in front of Judge Platel last fall and I found him to be absolutely wonderful in every way.  I think he was fair, intelligent and caring… I would have a very hard time believing it, were someone to tell me he ever did anything improper. 


But, I also know from my day in his court, that he doesn’t know nearly enough about what’s going on in real life in California as related to loan modifications, and how badly hundreds of thousands of homeowners need help.  The State Bar may be politically motivated at times, but I still have to believe that if they knew more, they’d change their current position.  And, of course, maybe not… maybe I’m be naive.


Although legitimate and ethical lawyers have helped a hundred thousand or more homeowners get loans modified in California, it’s not something homeowners ever talk about publicly, as I said.  And the attorneys that help them either can’t talk about it… or they don’t want to, for fear of the State Bar’s wrath.  So, how would anyone who isn’t directly involved, come to know any of the details.


SB 94 Never on Trial…


As I mentioned, the State Bar has never put its so-called interpretation of SB 94 on trial, and I believe the reasons for this are more than evident.


First of all, they’ve never needed to, as the threat of prosecution has caused attorneys to accept relatively minor discipline rather than take the risk and assume the financial burden of a trial.  And for another, the State Bar knows that their interpretation of SB 94 is very likely not going to prevail at trial…. or, in plain language, they know it’s quite possible, if not probable, that they’ll lose.


I say this for one reason: SB 94 simply does not say what the State Bar wants it to say.


And here are a few clips from the law library on how laws are to be interpreted… by what they say… 


“The starting point for any issue of statutory interpretation… is the language of the statute itself.”  United States v. Bly¸510 F.3d 453, 460 (4th cir. 2007).  “We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statue what it says there.  When the words of a statute are unambiguous, then this first canon is also the last: ‘judiciary inquiry is complete.’” Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253-54 (1992) (quoting Rubin v. United States, 449 I.S. 424, 430 (1981). 


“The Supreme Court has repeatedly emphasized the importance of the plain meaning rule, stating that if the language of a statute or regulation has a plain and ordinary meaning, courts need look no further and should apply the regulation as it is written.”  Id.  In most cases, a textual reading will be dispositive.  United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989).  “absent some obvious repugnance to the statute, the… regulation implementing [TILA] should be accepted by the courts.”  Anderson Bros. Ford v. Valencia, 452 U.S. 205, 219 (1981).


The State Bar certainly knows that their own prosecutors and even their judges don’t know much about the subject.  So, it’s difficult for me to imagine that a prosecutor who, knowing that he knows little about a topic would relish the thought of trying a case against a defense attorney with extensive knowledge of the subject matter.


The problem facing the State Bar and lawyers involved in helping homeowners with loan modifications today, is that the Bar’s “cleaning up of the backlog” continues to sweep legitimate and ethical lawyers into its net, and these lawyers are less likely to back down and accept the State Bar’s settlement of minor discipline.  In at least two cases, the lawyers being strong-armed by the Bar have told me they want and will have their day in court.


Several State Bar insiders have told me that this situation has made the State Bar “angry.”  In fact, one of my sources described the Bar as having become “irrationally angry,” and feeling like they’re being “backed into a corner.”


And the only reason for the State Bar to be angry is because they’re scared… they have put themselves into a terrible position in many ways, and I don’t care what they do or don’t do… I won’t stop screaming until my right to hire an attorney is assured.


I personally speak with and receive emails from thousands of homeowners at risk of foreclosure each month, and have been for over three years.  As such I’ve had a front row seat for the unfolding of the foreclosure crisis like no other.


I can state unequivocally that servicer abuses are as commonplace as ever, and that the majority of homeowners require a significant amount of assistance if they are to get their loans modified.  And we should all understand that if homeowners cannot find legitimate assistance, they will find illegitimate assistance, which means they’ll get ripped off for thousands of dollars all over the state on a daily basis, which is what is happening today.


In Conclusion… the State Bar’s Agenda Must Not be Allowed to Prevail…


I believe that there should be no question about the following…


  1. The California State Bar’s so-called interpretation of SB 94 is wrong and moreover they know it’s wrong, but they are under extreme pressure from the banking committees in the state legislature and left alone they will ultimately make it impossible for California homeowners to hire a lawyer when at risk of foreclosure.
  2. I also know that the unintended consequences of SB 94 are causing great harm to at least tens of thousands of California homeowners annually, and if the State Bar prevails, the damage to our state, to say nothing of the damage to individual families, will be incalculable.


My goal is simply to make sure that California homeowners who want to hire a lawyer to help them get their loan modified are able to do so… and to the extent possible, without fear of being scammed.


The California State Bar must be forced to design a more thoughtful answer to the problem of scammers than attempting to effectively eliminate legitimate attorneys who can provide assistance to California’s homeowners during this unprecedented crisis.


Three years ago there were those that would say that homeowners didn’t need a lawyer to get their loan modified.  They were wrong and back then I would reply that in fact many do.  But today, three years later, I have watched 4,000 homeowners attempt to get through the process on their own, and I’ve received over 30,000 emails from homeowners all over the country… and the FACT is… it’s just not something most people can do on their own.


Telling homeowners they didn’t need a lawyer… that they could just call their bank directly or contact a HUD counselor was at best misleading… but more accurately, it was a LIE.


The well documented abuses by servicers are every bit as prevalent today as they ever were.  While it’s true that some servicers have gotten better at dealing with the loan modification process… many homeowners have gotten worse.  Now more than ever we will need our lawyers to get through this crisis with the minimal amount of collateral damage.


If you have a contrary opinion on this issue that is based on some individual past experience, I strongly urge you to realize that were the State Bar to stop its intimidation of legitimate and ethical lawyers from helping homeowners, there would be thousands that would help. The scammers wouldn’t no longer be able to survive and it’s highly likely that your own experience would have gone differently.


If we ignore this issue, then very soon California homeowners will literally be on their own, there won’t be any legitimate lawyers left willing to help them get their loans modified.  Litigation will increase as will bankruptcy filings, eventually bringing our courts to a standstill as they are in Florida.


Your state assembly representative and state senator needs to hear from you on this issue.  You should care a great deal that you have access to legal counsel, should you decide you want or need it… no matter what… always and forever.  No government agency or special interest group should be allowed to take that away from an American citizen… EVER.


Mandelman out.

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