Tempted By Foreclosure Crisis, Some Lawyers Overcharge & Underwork
The foreclosure crisis has resulted in a lot of work for lawyers hired to try to help struggling owners hang onto their homes.
But it has also resulted in a record number of complaints concerning claimed unscrupulous practices, some of which have already led to disciplinary action, according to a Daily Business Review article reprinted in New York Lawyer (reg. req.).
“There has definitely been a trend in the last six months or year where attorneys are having some involvement in loan modification scams,” says Arne Vanstrum of the Florida Bar.
He says the Florida Bar received 100 complaints in the last six months concerning lawyers involved in loan modifications, many of them in South Florida. Meanwhile, the state attorney general’s office got 756 complaints through August, a record. In all of 2008, the AG’s office got only 61 such complaints, the business publication recounts in a lengthy article.
Meanwhile, the California State Bar has taken the unusual step of making public the names of 16 attorneys accused of misconduct concerning loan modification matters.
Attorneys often get into trouble because of fee issues. Clients should be charged based on the amount of time it takes to handle their matter, not the size of the mortgage, says George Castrataro. He formerly worked for the Legal Aid Service of Broward County and is now in private practice. Clients also need to be clearly informed if representation will not begin until they have made a number of monthly payments to cover a required minimum retainer, he tells the Daily Business Review.
Another potential ethical pitfall is presented if a lawyer is too closely involved with a non-law-firm loan modification company, says Ryan Wiggins, who serves as deputy director of the state AG’s office.
Under a 2008 federal law that doesn’t apply to attorneys, loan modification companies can’t charge upfront fees, he explains to the business publication. This has led a number of firms to affiliate with attorneys, but unless the attorney is acting as a lawyer and actually representing company clients he or she is then in violation of the federal law, too, according to Wiggins.
Many complainants also contend that lawyers take their money and then do little or no work.
Earlier related coverage:
ABAJournal.com: “Working With Foreclosure Consultants Can Get a Lawyer Burned”
ABAJournal.com: “Calif. State Bar Prez Blasts Lawyers for Taking Advantage of Foreclosure Clients”
ABAJournal.com: “Business Booming for Lawyers Who Help Homeowners Facing Foreclosure”
