Mortgage Modification: The Hottest Minefield in Legal Practice

Mortgage modification — it might sound like a hot little area for a real estate lawyer who wants to augment a slow practice these days. Turns out, it isn’t likely to bring lawyers large sums of money, and can lead the uninitiated into hot water.

Fishkin tells it like it is on Tuesday (Photo by Jason Doiy)

At least that’s how Walnut Creek legal ethics attorney Jerome Fishkin broke it down Tuesday at a lunchtime talk for members of the San Francisco Trial Lawyers Association. About 25 plaintiffs’ attorneys descended on the Bush Street conference room for pizza and advice on a number of topical ethics topics.

Fishkin, who defends practitioners in State Bar actions, said he has 10 active cases representing lawyers involved in mortgage modification work. A couple came from consumer complaints, a few others are advertising inquiries from the California State Bar. One is a lawyer swept up in an attorney general’s lawsuit against a company and anyone associated with it.

The ways Fishkin says lawyers get themselves in trouble:

• Because it’s hard to make a living doing mortgage modifications, lawyers tend to hire a lot of back-office staffers to do the work. That can lead to questions about letting unlicensed people practice law in their stead.
• Not paying attention to the geographical location of lenders and borrowers, and inadvertently practicing law in two or three states. If the borrower is in Nevada and the lender in California, and something goes wrong, the lawyer might get sued in Nevada.
• A whole host of regulatory agencies is watching. The Department of Real Estate has been harvesting names of any and all lawyers connected with mortgage modifications, which they pass indiscriminately to the State Bar. The Federal Trade Commission might also take interest, though Fishkin said he hasn’t seen that happen yet.
• Finally, even if a lawyer avoids the above pitfalls, there is always the danger of the super-autonomous back-office team. If they are running most of the show, they might just run off with your money, Fishkin warned.

In addition to his clients, Fishkin says he has a whole collection of Thank You notes from lawyers happy he talked them out of going into the business.

— Petra Pasternak

Comments

[Joe Reisinger]

Fishkin says:

I'm delighted to see Jerry Fishkin is adding his 2 cents worth on the mortgage modification mess. While I don't recall having ever met Mr. Fiskhin, before my retirement from hardcore insurance defense practice, I defended a fair number of lawyers: mainly on E&O claims that often morphed into breach of fiduciary duty cases.

In the conversation about what path these "clients" (insureds) took to become defendants in a civil action, Fishkin's name often came up in the context of "If only I had done what Fishkin had said...".

Since this scenario pretty consistently repeated itself for nearly three decades, I speculate that if Mr. Fishkin says a certain area is ripe with legal/ethical pitfalls, he's most likely correct.

[olique estefan]

You inspired me to be a blogger, thank you for that
This is a very touching blog, If I only could have had an idea I wish I had read the material on here sooner. Thanks for sharing everything this is a very nice blog

[Ron Stone]

Truly dangerous waters but real, sincere, professional mortgage modification assistance is desperately needed today.

[Liz@buytoletmortgages]

It is absolutely shocking the state of the mortgage and workplace, and innocent people are paying for the banks mistakes. On top of this, savers are nowing being hit by no interest, where is the justice in all this.

[Ron Stone]

I ran across a firm that says they can do a loan redo (they don't call it a modification) as it results in a new loan for people under water who have been paying on time and with decent credit (620 mid). They say they have a staff of attorneys that have a 93% success rate (for home owners that qualify) and the net result is a new lower interest loan for the lower value with no credit hit. Ever heard of such?

[REO Properties for Sale]

Hello, I enjoy your article. This is a nice site and I wanted to post a comment to let you know, nice job! Thanks

[Cricket McMillin]

Attorneys can't do modifications because they don't know how. I live in Florida and the stories I hear about how attorneys have ripped off clients in this field is unbelievable. I have been in the mortgage industry for nearly 40 years but currently hold no licenses. It is my knowledge as having done my own underwriting and processing that has given me the knowledge to get them done. I started with my own over 3 years ago, and when it sailed right through I knew I could help others. So I started a business out of a home office and have been doing them for 3 years, with a 100% success rate. Not everyone can qualify for a modification and when they don't I send these people to other programs and organizations, but the ones I do, get done. Recently I went to a seminar on foreclosures given by an attorney. It was the most depressing thing I've ever sat through, so much so, that a few people got up and left. I couldn't stand it anymore and spoke up about modifications and that I do them, etc. Next thing I know I get a letter from the Division of Consumer Affairs shutting me down because I don't have a mortgage brokers license and that I am in jeopardy of going to jail and having to return fees. The attorneys take up front fees of more than $2500 and charge monthly fees to keep the people in their homes for 30 days at a time. I charge a flat fee of $699.00 and get them done. There is no justice, my clients will suffer and now I have to find another source of income. I am 65 years old, on SS and now I have to go find a job. When will the Government stop butting in? I am helping people, charge a modest fee and I'm mad as hell.