Some Foreclosure Defense Attorneys Begin Going Into Mortgage Lending Business?

The New York Times reports:

• For some Florida residents, the price of getting out of foreclosure will include taking on a second mortgage — payable this time to their lawyers. The new mortgage, which takes effect only if the foreclosure is dismissed and the homeowner’s debt to the bank is reduced, is controversial among defense lawyers, some of whom call it “creepy” and “crass.” Yet even they acknowledge it offers a solution to a vexing question: How do they get paid?

• After recent revelations that banks were sloppy in processing many foreclosures and in some cases lack standing to seize a house, potential clients seeking to challenge their lenders are flocking to lawyers. But while these distressed homeowners might have a case, they generally lack the resources to pay legal fees. Being in foreclosure usually means being broke.

For more, see Taking 2nd Mortgage to Pay the Foreclosure Lawyer.

(1) To the extent foreclosure defense attorneys in Florida are not seeking court orders directing lenders and loan servicers to pay the homeowners' "prevailing party" attorneys fees in a successfully defended case, they may be leaving themselves open to future malpractice claims from their "grateful" clients for failing to pursue their rights in recovering, from the losing lender, any attorney fees they may have paid for their legal representation.

Said prevailing party attorney fees is calculated simply by taking the number of reasonable hours the attorney puts into the case (subject to court approval), and then multiplied first by the attorneys hourly billing rate as approved by the court, and second - in contingency fee cases -multiplied again by any contingency fee "risk multiplier" granted by the court. For two Florida cases that illustrate the calculation of attorneys fee awards in this manner, and the subsequent application of a "risk multiplier", see:

• Standard Guaranty Insurance Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990),
• Florida Patient's Compensation v. Rowe, 472 So.2d 1145 (Fla. 1985).

By this way, this is the way experienced plaintiffs' counsel have been getting paid for years in cases brought under the Florida's Deceptive and Unfair Trade Practices Act. See The Florida Bar Journal: Entitlement to Attorney's Fees Under FDUTPA. Consumer law litigators likewise get paid in the same manner in bankruptcy cases, and cases involving the Fair Debt Collection Practices Act and Federal Truth In Lending Act, to name just a couple.

Under Florida law, where an agreement allows for an attorney fee award to one of the contracting parties (mortgage loan agreements typically allow a foreclosing lender to tack on its attorney fee to the amount owed on a loan when suing a homeowner to enforce the mortgage terms), state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Not only might the lender and servicer be court-ordered to cough up fees to the homeowners' attorneys, it's possible that the foreclosure mill law firms representing the lenders/servicers (at least in Florida) may also be ordered to foot part of the tab as well by reason of section 57.105(1), Florida Statutes (bold text is my emphasis, not in the original text):

• Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:
  
  (a) Was not supported by the material facts necessary to establish the claim or defense; or
  
  (b) Would not be supported by the application of then-existing law to those material facts.

For an old (July/August, 2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.), see Pleading Requirements for a Claim for Attorneys' Fees.