This week the Florida Bar made public the outlandish and misleading representations that have recently plagued the mortgage modification industry in this state and probably nationwide. The mortgage modification industry has sprung up faster than mushrooms - mostly through mortgage brokers that have seen their ability to make loans dry up in this recession and are applying net office sales techniques to the mortgage modification boom. The problem is that many states have enacted new laws to put them out of business.
The situation is important enough that an "Ethics Alert"was issued by the Florida Bar on March 15th.
Typically, the mortgage modification firm - which often uses "net offices" just like in the good old lending days and are just where a sales person hangs out - will recruit an attorney to "watch" the modification process and they will advertise that there is an attorney "representing" the client's (the borrower's) interests. Typical language is, "our attorney will represent you in the modification process and review all of your documents," or similar. In reality the attorney does almost nothing or works under the direct control of a non-lawyer.
Florida passed a Mortgage Rescue Consultant law in 2008and many firms have sought to stay in the lucrative Florida mortgage assistance market by trying to skirt that law by using a letter opinion by the Florida Attorney General that exempts attorneys from work they doing in defending a client in a foreclosure. The result however is a plethora of ethics violations for the lawyers that get involved and Unauthorized Practice of Law (UPL) violations for the mortgage modification firm if they give any type of legal service.
Usually these firms charge between $1,500 to $3,500 for modification services - the price is often set by the salesman (who is not an attorney). The salesman gets an commission (anything above the set fee) and the attorney gets a nominal review fee - or something up to 10% of the total fee if special services are provided, such as using the attorney trust account to deposit the fee for clearance and then disbursement to the loan modification firm. The Bar also issued an instructive articleon how one modification firm was prosecuted, saying, "Florida lawyers are being approached about working with nonlawyers offering foreclosure-related services to consumers, but the proposals present a veritable minefield of ethical problems."
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com. See our easy to find articles at Need Short Sale Information? - These Articles Probably Answer Your Question
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Gabe - Great post and reminder - There are more than a few snake oil salesmen out there waiting to prey on unsuspecting consumers.