Attorney Agrees To Refund Upfront Fees For Failed Loan Modification Attempts Under Threat Of Bad Media Publicity, State Bar Complaints

In Newark, California, KGO-TV Channel 7 reports on the experiences of three local homeowners seeking to have their home loans modified with an area law firm:

• [Mika] Baba says she's regretted getting into [her home] loan almost from the beginning and has been unable to renegotiate it. Then she heard an ad from Lucas Law Center on the radio. "And that's why I called Lucas Law Center because they made the promise that they can do the modification. If they couldn't you'd get your money back. And at this point, I'm in a corner where I have no choice," said Baba.

• That's the same reaction Scott Castruita and Steve Ferdin had when they heard the same ad. "I called them up, so they said they could make all the phone calls for me and they knew people and they said they know how to get hold of the people at Indy Mac," said Castruita. Scott and Steve paid $3,200 up front to hire Lucas Law Center to negotiate a loan modification on their home in Antioch. Mika paid $3,700 to hire Lucas, and what do they say they got for their money? "They haven't done anything for me," said Baba.

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• Mika, Scott and Steve all requested a refund from the Lucas Law Center. Lucas turned down Mika because she fell under two exemptions to its refund policy. She is in a negatively amortized loan and she had been previously denied for a modification. Those exemptions were stated explicitly in Mika's contract, but she said they were never explained to her.

• We called Lucas Law Center and it agreed to refund her money 100 percent. Scott and Steve also received a refund, after they threatened to file a formal complaint with the state bar.

For more, see Homeowners dissapointed with loan service.

Postscript:

When hiring an attorney in connection with a loan modification, a homeowner should ask upfront whether the attorney will engage in actual litigation in court, either defending against a foreclosure action, or initiating a lawsuit, either for:

• violations of applicable lending, consumer protection, and other laws; or

• in a non-judicial foreclosure state, asking a state court to intervene in a foreclosure attempt by obtaining a temporary restraining order in order to demand that a lender to produce the promissory and the associated legal documents proving that the lender has the legal right to conduct the foreclosure.

If an attorney holding him/herself out as doing loan modifications pockets thousands of dollars in upfront, or periodic fees without any intention of representing a homeowner in the actual litigation described above, the homeowner should seriously consider the possiblity of filing a complaint against the attorney with the state bar association for charging excessive fees(1) and for taking the client's case and failing to do what was in the client's best interest (as well as considering any possible malpractice claim against the attorney).

In California, complaints can be filed with the The State Bar of California. To file a complaint against a California attorney (or a loan modification firm for engaging in the unauthorized practice of law), see Overview Of Attorney Discipline System (go here for a Complaint Form).

In addition, consumers generally can avail themselves of the California State Bar's Mandatory Fee Arbitration Program (MFA), which is an informal, low cost forum for resolving fee disputes between lawyers and their clients. MFA arbitration is mandatory for the lawyer if the client requests arbitration.

(1) The Florida Supreme Court, in The Florida Bar v. Richardson, 574 So.2d 60 (Fla. 1990), quoted from one of its earlier decisions on the harm caused by attorneys charging excessive fees:

• Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that; it brings the court into disrepute and destroys its power to perform adequately the function of its creation. Baruch v. Giblin, 122 Fla. 59, 63, 164 So. 831, 833 (1935).

The court in Richardson, in finding that the attorney fees charged in the case before it were clearly excessive, went on:

• Mr. Richardson is an officer of the court, subject to its orders. We find that these were clearly excessive fees and that the amounts he charged did in fact constitute a"social malpractice." Ethical Consideration 2-17 of the Model Code of Professional Responsibility explains that a lawyer must charge clients reasonable fees because the "excessive cost of legal service would deter laymen from utilizing the legal system in protection of their rights." This Court recognizes that a lawyer's fee will vary in accordance with many factors; however,we fully concur with the expert witness's statement in this case that all of the time a lawyer spends on a case is not necessarily the amount of time for which he can properly charge his client. As explained by the expert witness, "[I]t's the time that reasonably should be devoted to accomplish a particular task." This statement is consistent with the principles we set forth in Standard Guaranty Insurance Co. v. Quanstrom, 555 So.2d 828 (Fla. 1990), and Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), neither of which allows billing clients solely on billable hours or charging clients without determining what is the reasonable time to accomplish a particular task. Further, absolutely no justification exists to bill for twenty minutes for every phone call or for a minimum of forty-five minutes to prepare a page of a document without regard to the amount of time actually spent. UnauthPractOfLawTheta