California Regulator To Consumers Saddled With Unaffordable Mortgages: Stay Away From Loan Modification Outfits Engaged In "Lawyer Renting"

A recent New York Times' story featuring the loan modification operation Federal Loan Modification Law Center(1) contains this excerpt describing an arrangement that some might refer to as "lawyer renting," in which a company, attempting to circumvent laws prohibiting the collection of upfront fees for its services, enters into a deal with an attorney that allows the outfit to conduct its activities as a law firm (attorneys are generally not prohibited from pocketing upfront fees for their services):

• The three original [Federal Loan Modification Law Center] partners brought in Mr. [Nabile "Bill"] Anz to gain a crucial asset: his law license. Having a lawyer in charge enabled them to market their venture as a law firm and thus collect upfront payments under California rules. “Jeff [partner Jeffrey Broughton] asked me how I could, for lack of a better word, legitimize it,” Mr. Anz said.

• The California Department of Real Estate warns consumers that many dubious loan modification companies have organized themselves as law firms solely to allow them to collect upfront fees, even though the lawyers have little, if anything, to do with the services provided. The department cautions consumers against hiring such companies.(2)

For the story, see Subprime Brokers Back as Dubious Loan Fixers.

(1) Federal Loan Modification Law Center (aka FedMod) has been tagged by the Federal Trade Commission with a lawsuit alleging violations of Federal law in offering loan modification services to the general public. Go here for links to the FTC press release and some of the relevant court documents filed against FedMod.

(2) For those attorneys who have yet to "receive the memo", see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications, an advisory of the Committee on Professional Responsibility and Conduct of the State Bar of California setting forth prohibited activities by attorneys when associating with loan modification firms.