Report: Government Decision To Exempt Lawyers From Ban On Pocketing Upfront Fees For Negotiating Mortgage Reduction Plans Opened Floodgates For Loan Modification Rackets

From a recent investigative report from The Center For Public Integrity:

• [A]ttorney-affiliated firms that aggressively market mortgage reduction plans have mushroomed in the past few years because of a loophole in a government program called “loan modification.”
  
  Created in 2009, the program was designed to help struggling homeowners facing foreclosure brought on by the recession. But a government decision to exempt lawyers from a ban on charging advance fees for modification services has led to scams that have cheated thousands of homeowners.
  
  Many homeowners who were supposed to benefit instead lost millions of dollars to firms that promised them loan modifications and other foreclosure-relief services that they failed to deliver, a Center for Public Integrity investigation has found.
  
  Since 2010, these practices have drawn tens of thousands of consumer complaints to federal and state authorities, sparked multiple legal and ethical concerns over what constitutes the legitimate practice of law, and raised questions about how aggressively states have monitored the conduct of lawyers who profit from the schemes, the Center’s investigation found.
  
  The Center identified more than 1,000 attorneys — more than one-third of them in California and Florida — who participated in loan-modification and foreclosure-prevention schemes that resulted in either law enforcement actions or disciplinary reviews by state legal authorities.

For more, see Lawyers exploit foreclosure ‘rescue’ fee loophole (Government decision enriches attorneys, stings homeowners).