California Bar: Disregards Attorney General’s Views, Screws Homeowners
Itâs official.Â If youâre 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. Â
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.
Itâs not hyperbole and Iâm not kidding… Iâm being dead on serious and accurate.Â In California, we have finally managed to take a horrific situation, and by applying everything from apathy to ignorance, make it exponentially worse.
Whatâs even more stunning, is that four years after the Obama Administrationâs Making Home Affordable HAMP loan modification program was launched, and for the most part, institutionally WEâVE LEARNED NOTHING about the loan modification process, and that not only applies to California, thatâs true nationwide.Â 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 weâve collectively managed to remain resolute in our ignorance?Â Do we have some sort of widespread institutional learning disability?
No.Â Itâs simple, really.Â We donât give a damn about it.Â Getting your loan modified means youâre a deadbeat borrower… you bought a house you couldnât afford… should never have even been approved for the loan… and the faster youâre evicted the better, as far as we are concerned.Â So, donât 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, isnât that whole foreclosure thing almost over anyway?Â Thatâs what the news on T.V. and in the papers have been saying.Â So, whatâs the problem?Â Iâm doing fine.Â In fact, Iâm hoping you get thrown out of your house soon, so perhaps I can go buy it on the cheap.Â Maybe you should stop whining and get a job.
Well, alrighty then.Â If thatâs how we want it, I guess thereâs not much I can do about it.Â But, let me assure you of something before I acquiesce to the madness: Weâre 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.
Thereâs no question about that, by the way, but unfortunately the reason there arenât any questions is that institutionally weâre too ignorant to even come up with one.
Letâs get to this fast, before I lose most everyone to some combination of ADD, American Idol, Internet porn and substance abuse.Â 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 wonât spend a lot of time on this point because Iâve covered it so many times it makes my hair hurt.Â You can read my more recent articles on this topic HERE, HERE, HERE, HERE, HERE, HERE, and HERE. Â
As of the end of this year, we will have lost FIVE MILLION homes to foreclosureâŚ and 10 MILLION MORE American households have faced the prospect of foreclosure since the crisis began during the third quarter of 2006.Â 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 delinquentâŚ and 3.3 MILLION of them are over 90 days delinquent or already in pre-sale inventory.
In addition, itâs 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.Â 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, âin a normal, healthy market, honestly you’d expect to see less than 5% of all sales be foreclosure related.”Â So, weâre a long way from having a âhealthyâ 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 âcompleted more than 5.82 million permanent loan modifications since 2007.âÂ The federal governmentâs HAMP program accounts for roughly a million of those, and the Treasury Departmentâs 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 (âCRLâ), a nonprofit, non-partisan organization that works to stop foreclosure during this housing crisis and protect homeownership and family wealth, in itâs 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 CRLâs numbers are that much more remarkable when you take into account Californiaâs relatively high and persistent unemployment, and the degree to which Californiaâs homeowners are âunderwater,â 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 Treasuryâs latest report, itâs unquestionable that loan modifications are by far the most effective tool we have for keeping borrowers at risk of foreclosure in their homes.Â 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, itâs essentially loan modifications or nothing.Â Thatâs not an opinion… itâs an equation.Â The numbers are what the numbers are.Â I donât know how many homeowners have saved their homes from foreclosure by suing their bank, but Iâll 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.Â (Any takers?)
And one last point… based on data provided by the California Reinvestment Coalition (âCRCâ), 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, Californiaâs 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.Â Thatâs FOUR BILLION… with a âBâ.
By the way… the same CRC report last June showed over 700,000 California homes in the foreclosure pipeline. Â 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? Â That’s a lot of money to the State of California, in fact, that’s as much as our budget deficit today. Â We don’t need to double our deficit… the one we can’t figure out how to pay off already. Â 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 inevitablyÂ come. Â Or do everything we can to minimize the damage. Â 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.Â Foreclosures in this country first spiked during the third quarter of 2006, for heavenâs sake.Â HAMP was launched just shy of four years ago.Â Frankly, itâs inexcusable and shamefulÂ that institutionally we havenât learned anything meaningful about how foreclosure avoidance and loan modifications SHOULD be handled.
And we havenât learned anything new, or if we have weâre keeping it a secret.Â Call any state agency and ask what you should do to save your home if at risk of foreclosure and youâll 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.
Thatâs it and thatâs all.Â Weâve lost five million homes to foreclosure since 2007… weâve modified almost six million mortgages since then too.Â And I donât even know how many millions of loan modifications weâve botched… screwed up… failed to provide even though we should have modified the loans.
And weâve learned nothing more than my friendâs parrot would have during that time… SQUALK… Call your bank directly… or contact a HUD approved housing counselor… SQUALK.Â (Actually, my friendâs 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.Â By all means, do those things first and if either works out for you thatâs just fantastic.
All Iâm 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 didnât work.Â On a slow day Iâll get five.Â Some days I get 30.Â In my âsavedâ folder right now I have close to 6,000, and I donât save all of them.Â Also, I have 28,474 unread messages.
How about if we just say that obviously, âcall your bank directly or call a HUD counselorâ isnât a strategy thatâs working for everyone?Â I think thatâs a fair statement no matter who Iâm talking to.
So, letâs forget what has happened over the last four years for a moment, and having learned from the past, letâs take a look at what SHOULD have happened, had the process been more optimal.Â And in doing so, letâs answer the question: Do you need a lawyer if youâre facing foreclosure?
The optimal approach to the foreclosure avoidance process
If youâre 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 itâs 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.Â I know, I know… few can do that, but regardless itâs 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.Â 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.Â 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.Â So, most think they want to get their loan modified, but the fact is, if weâre being intellectually honest about this, they donât really know… they canât know… until they know all the facts.Â 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 donât care what anyone decides one way or the other… it doesnât matter to me in the least.Â If I know someone personally, or hear about someone losing a home, Iâll feel badly for them, but thatâs where my interests both begin and end.
And so weâre 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.Â 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.Â And that doesnât 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 thereâs a second mortgage, that may make a difference as to which path one might choose as being optimal.Â And was the mortgage or second mortgage âpurchase money,â or was cash taken out of the home when last refinanced?Â 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?Â Itâs important, because loans owned by Fannie Mae or Freddie Mac follow different guidelines, one of which is that no principal reductions are offered.Â And, how far behind you are can matter to Fannie and Freddie more than others as well.Â 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.Â For example, HSBC, I think everyone will tell you, doesnât really modify, theyâre more likely to forebear, meaning they may stick your late payments into your loan and let you repay them over some period of time.Â And Wells Fargo is legendary in terms of being, letâs just say… difficult.Â There are lots of things to have learned over the last four years if you were paying attention.
- Iâve been told that filing a Chapter 13 bankruptcy may provide you with the ability to âstrip a second,â 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.Â And there are risks, including being charged with bankruptcy fraud, so itâs not something to guess at, in my opinion.
- How far underwater is the borrower, if at all?Â Might the borrower qualify for refinancing under HARP, or any of the other available programs?Â And what are the borrowerâs expectations for future real estate appreciation?Â From 1900 to 2012, homes appreciated on average 3.1 percent per year in this country.Â So, if a homeâs value dropped by 50 percent, that means it will have to appreciate by 100 percent before you break even.Â At the average rate of 3.1 percent… that will take 24 years.Â So, if someone is figuring on 5-7 years before prices âcome back,â 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 âfraudâ 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.Â The truth would have to be that depending on the specific facts involved, some maybe should… and others probably shouldnât.Â And regardless of what your facts are, you need to consider what your financial situation looks like?Â Suing a giant financial institutions is NEVER CHEAP, QUICK OR EASY… and there is NEVER any sort of guarantee that youâll win and it could take years and that will take a toll on most people, financially and otherwise.Â Not everyone has the right genetic make-up or the financial resources for long-term litigation… and it probably shouldnât be anyoneâs first choice.
- What is your mental state and what are your concerns about the future?Â Sometimes our minds can overestimate how bad something will be, and sometimes the reverse is true.Â 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, itâs not exactly an intuitive process, meaning borrowers canât figure it out on their own using a handy kitchen calculator or anything like that.Â 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 itâs important that it be done because borrowers who donât qualify should be told that before they apply.
Okay, have I made my point?Â Iâm not saying thatâs how things have been handled in the past by most lawyers offering to help with loan modifications, Iâm saying thatâs 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.Â In reality, itâs 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. Iâve 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 didnât already know it, that servicers are capable of taking advantage of homeowners in the foreclosure process.Â Were that not the case, we wouldnât have seen the $25 Billion National Mortgage Settlement come to pass, and it wouldnât have included two hundred pages of new servicer standards.Â 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?Â 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 havenât taken the time to fully understand the process or the options involved.Â And as a result, they donât even know enough to know what they donât know.
The unintended consequences of the State Barâs 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 didnât like hearing that homeowners were writing checks to anyone but them.
Of course, a law prohibiting advance fees for loan modification services wasnât likely to stop scammers.Â Good Lord… scammers donât follow laws… thatâs why we call them scammers.Â We already had plenty of laws on the books that made defrauding homeowners illegal (unless youâre a mortgage banker in which case itâs 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.Â 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 Barâs Review Department, which is the Barâs 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 Barâs interpretation of the law in California, you wonât be able to find one.Â I tried it yesterday afternoon for a couple hours and couldnât do it.
The State Barâs 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.Â What youâll have no trouble finding are scams… and those operating illegally.Â Be careful though, because should they end up shut down by the Bar while handling your loan modification, youâll 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.Â They should really be ashamed because itâs their unwillingness to learn about the subject that is now causing innocent people to be harmed, and some to lose homes unnecessarily.Â I donât know how many, and I donât care… even one is too many.
What has our Attorney General or Governor said about SB 94?Â The answer will surprise you and the State Bar Doesn’t Seem to Care.
Whatâs even harder to understand is that the State Barâs most recent interpretation of SB 94 completelyÂ 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.Â Throughout both documents you will find the AGâs and Governorâs 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 11Â
â… 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.â (Emphasis added.)
âThe 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 borrowerâs lender.âÂ (Emphasis added.)
âSenate Bill 94 prohibits charging of advance fees by persons offering to perform loan modification from âthe institution servicing that borrowerâs residential mortgage loan.ââ
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 borrowerâs lender, and nothing else.
The breadth of the statute is also self-limiting in that it applies to âeach and every service the person contracted to perform or represented that he or she would perform.â Civ. Code, Â§ 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.Â
… so long as the attorney has not contracted to perform an actual loan modification with the borrowerâs 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 borrowerâs 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.Â
Well, that sure explains a lot, because thatâs precisely what has been missing in every discussion about SB 94 at the State Bar for the last four years… COMMON SENSE.Â (Emphasis added, but nowhere near enough.)
Hereâs a quote from the Reply Brief filed on behalf of Governor Brown and AG Harris in DUENAS…
âDuenas 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.â
AG Harris also points out in Duenas that SB 94 doesnât limit the fees lawyers may charge homeowners and even says that nothing in SB 94 prohibits a lawyer from billing hourly for services.Â â
What the Attorney General and Governor of California are pointing out is that you cannot ânegotiate or arrangeâ or attempt to do either of those things, much less âperform a loan modification or mortgage loan forbearance,âÂ UNTIL YOUâVE APPLIED for a loan modification or other mortgage loan forbearance, because you cannot ânegotiateâ alone or arrange to change the terms of a loan by yourself.
So, as long as a lawyer has not contracted to ânegotiate, arrange or performâ a loan modification or other forbearance, until thereâs a lender or servicer in the picture SB 94 doesnât apply and lawyers are free to charge and collect fees for other services as they see fit.Â 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 theyâve been completed, according to Californiaâs Attorney General and Governor.
Now, I know what some of the lawyers reading this are thinking: âSo what, Mandelman… that may be what the Attorney General and Governor think about SB 94, but that doesnât change a thing as far as the State Bar is concerned.âÂ (Was I right?Â I know… spooky, right?)
Well, I kindaâ figured thatâs what youâd be thinking because I kindaâ left out one teensy tiny little fact about the DUENAS case when I was describing it earlier… the Attorney General and Governor werenât the only defendants in that case.Â No they were not… Si, es verdad.
No they were not… the California State Bar was also named in DUENAS, and so the State Barâs 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, thereâs the link… and youâre welcome… but here are a few highlights that, if youâve read the Barâs Taylor Decision (link above), you should be shocked to read…
Based on itâs 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.Â Civil Code 2944.7(a)(1) (Emphasis supplied.)Â And then… â(2944.7(a) merely limits the timing of compensation for certain services; namely negotiating, arranging or performing a loan modification.â
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 itâs possible that whatâs going on is going on, Iâll be forever in your debt.
Despite Civil Code Section 2944.7(aâs) application to ONLY NEGOTIATION, ARRANGEMENT, OR PERFORMANCE of a loan modification, (plaintiffâs) 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… Plaintiffâs theory is not supported by the plain language of the statute…â
Go ahead… start explaining.Â Because all I could think of to say after reading that for the first time was… WTF.Â And then I needed to take a nap.
The issue, of course, is that the State Barâs 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, canât be paid for ANY of their work until âthe end of the process,â whenever that might be.Â No legitimate attorneys will work that way, Iâve 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 thatâs compliant with the State Barâs unbelievably draconian and wholly inappropriate interpretation in the Taylor case, and every time you find one Iâll pay you $100.Â Every time you get scammed, you pay me $100.Â Anyone interested in taking that deal?
When is the end of the process?
Itâs also worth noting that the State Barâs current position does not make clear when they think âthe end of the processâ 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 canât even list the number of things Iâve seen go wrong at the trial modification phase here… doing so could easily be the sole subject of an entire book.Â And yet, it wouldnât seem fair to consider the end of the process the point at which a permanent modification were granted, because itâs not up the attorneyâs fault if trial payments arenât made as agreed.
Just a few months ago, I wrote about one of the State Barâs prosecutors being asked during a pre-trial settlement conference exactly what the Bar considered âthe end of the process.âÂ Was it at the point that a trial modification was granted by a lender or servicer?
The prosecutor replied, âAs I understand it, they donât even do trial modifications anymore,â which as ANYONE with even a cursory amount of knowledge of the loan modification process would tell you, is another way of saying, âActually, I know NOTHING about whatâs involved in the process of getting a loan modified.â
âAnd thank you very much for playing… I believe we have some lovely parting gifts…â
Suzan Anderson, who until this year was the supervising trial counsel of the California State Barâs special team on loan modification has defended SB 94âs 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.Â I guess she could be right… if the personal injury lawyerâs 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.Â 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 donât pay their bill, whatâs a lawyer to do… sue them?
But, more importantly, itâs not what the law says.Â In DUENAS, the Attorney General says that she doesnât think SB 94 will prevent lawyers from representing homeowners, and I agree with her completely… as long as we get to follow herâs and the governorâs interpretation of what SB 94 allows and doesnât.
Right now, we’re not doing that. Â 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 donât know… maybe nothing, believe it or not. I mean, itâs not like our state or federal governments are doing all that much to help homeowners losing homes to foreclosure in general, right?Â 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? Â My guess would be: No one, thatâs who.
Itâs sort of like prison rape.Â Our Constitution doesnât allow for cruel or unusual punishment, if Iâm not mistaken, and I would think gang-rape would fall under the definition of âcruelâ if not âunusualâ punishment. Â But it doesnât matter… no one does anything about it because no one cares what happens to prison inmates.Â You know what they say… how did that theme song from Baretta go again?Â Donât do the crime if you canât enjoy the time (being gang-raped in the shower?)Â 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.Â As of now… people losing their homes are ashamed… they donât want anyone to know what their going through.Â The State Bar only hears about the people that got ripped off and whose homes were not saved as a result.Â The successes donât 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. Â Let’s be heard on this… Â
While she was still in her position at the State Bar, Ms. Anderson was also been quoted as acknowledging that it is… âa very problematical situation.â
Problematical?Â The woman is trying to kill me, I swear to God… itâs a problematical situization?Â Is that a factoid?Â I think for all intensive purposes thereâs 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 94âs impact… âI wish the law had worked,â Ms. Anderson said.
Well, heck-fire… me too, Suzy-Q.Â But, I guess it was just too darn problematical.
Okay, that’s enough.Â 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.Â Iâm not talking about a vegetative state, just say dim enough not to notice whatâs going on all around me, but still smile at my daughter, have a closet full of track suits, and crave butterscotch pudding.
Stay tuned… Iâm not done with this just yet.Â More to come…