Nevada Regulators Have Hands Full With Complaints About Foreclosure Consultants, Loan Modification Firms; Lawmakers Look To Close Loopholes

In Reno, Nevada, the Reno Gazette Journal reports:

• [E]very day, agencies such as the state's Mortgage Lending Division and Consumer Affairs Division are contacted by home owners victimized by fraud. [...] Minorities who have difficulty communicating in English are especially susceptible, said Joe Waltuch, commissioner of the State of Nevada Mortgage Lending Division.

• "Right now we have a lot of complaints," Waltuch said. "We get complaints daily regarding people who have paid money up front to either a foreclosure or loan modification specialist who claimed they would deal with the lender and help the borrower stay out of default or modify the terms of their mortgage. There have already been a couple of arrests and warrants outstanding for people."

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• Waltuch said his state office has the statutory authority to go after foreclosure consultants but not loan modification consultants who work with properties not in foreclosure. He said his agency work in a roundabout way using loopholes available through the Consumer Affairs Division. "It's a Band-Aid," said James Campos, commissioner of the Consumer Affairs Division. "There needs to be a more specific and targeted law in the books." On Feb. 11, the Assembly Commerce and Labor Committee held its first hearing on a bill sponsored by Assemblyman Marcus Conklin, D-Las Vegas, to address regulation of foreclosure and loan modification consultants, including the need for licensing.(1)

For more, see Struggling homeowners: Beware of scams.

(1) It may be that the state bar association should begin looking into some of these loan modification firms and foreclosure consultants. To the extent these operators are purporting to review homeowners' loan documents looking for violations of federal and state consumer & lending laws, those activities may constitute the unauthorized / unlicensed practice of law.

To the extent non-lawyer loan modification firms are teaming up with lawyers to provide these services, some activities (ie. using a person or organization to recommend or promote the lawyers’ services, aiding nonlawyers in the unauthorized practice of law, improperly sharing legal fees with nonlawyers, failing to seek lawful objectives of clients by failing to assess their individual needs, handling legal matters without adequate preparation, etc.) may constitute violations under the state bar's ethics rules.

For evidence of activities of attorneys involved with non-attorney loan modification firms that have caught the attention of state bar asociations, see:

• Cincinnati Bar Assn. v. Mullaney, 119 Ohio St.3d 412, 2008-Ohio-4541 (2008);
• Federal Judge, State Bar Slam Attorney For Stiffing Clients Referred By Loan Modification Firm; Lawyer/Foreclosure Consultant Ties Now Facing Scrutiny,
• ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications (issued by The California State Bar Association Committee on Professional Responsibility and Conduct).