State Bar Cautions Attorneys On Working With Loan Modification Firms

The Florida Bar News reports:

• 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. Bar Ethics Counsel Elizabeth Tarbert said the Ethics Hotline has received many calls from attorneys who have been approached by companies or individuals that call themselves foreclosure-related rescue services, experts on loan modifications, or short sales consultants. (See separate Ethics Alert) “Some of them are offering to set up lawyers in offices; some are offering to open partnerships with lawyers; some are offering to hire lawyers in-house to represent clients,” Tarbert said.

• The catch: None of that, or many other proposals by the companies, are allowed by Bar rules.

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• Janet Morgan, counsel in the Bar’s Ft. Lauderdale office, has headed up the UPL investigation of [loan modification firm] Outreach Housing. “They had a Web site and a television ad offering legal services of attorneys through a nonattorney entity. . . . A nonlawyer company can’t do that,” Morgan said. “And then when they brought people in the door, they promised to analyze their loan documents and determine whether there were any violations [of truth in lending and closing procedure laws] that occurred during closing.”

• Not surprisingly, Morgan said in every case investigated by the Bar, customers reported that the company found an actionable lending “violation,” and the Attorney General found the same in its probe. The company then proceeded to advise clients they had a basis for a federal suit and would arrange an attorney for them.

• Clients were also told to send all communications from lenders to the company. The company tried to hire attorneys to work in-house representing clients. When they found that was impermissible, Outreach created a captive in-house law firm, but that too caused problems. So the “law firm” was split off, but it was eventually dissolved, Morgan said.

• “Every time they would find there was a problem, they would change the way they did things,” she said. “They recreated themselves over and over. There were actual attorneys signing the lawsuits that were filed in federal court. However, we also found instances where our complainants did not understand a lawsuit was being filed in their name.”

For more, see Take care when working with foreclosure rescue services.

Go here for The Florida Bar's Ethics Alert: Lawyers should be very wary of loan modifiers.

Go here and Go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawTheta