Loan Modification Firm Engaged In The Unlicensed Practice Of Law, Says Florida AG

In a recent lawsuit filed by Florida Attorney General Bill McCollum, he accuses loan modification firm Outreach Housing with, among other things, engaging in the unlicensed practice of law in the conduct of its business activities. He describes the loan modification firm's activities in this regard as follows:

• Attorneys licensed in Florida enter into an agreement with Outreach Housing which acknowledges that Outreach Housing retains Limited Power of Attorney for the homeowners (clients) and that Outreach Housing may remove any file from an Attorney with or without cause upon two week’s written notice. (Lawsuit - paragraph 21);

• Outreach Housing’s clients make monthly payments to Outreach Housing for its services. These monthly payments are placed in individual segregated accounts [...] over which Outreach Housing has power of attorney. Outreach Housing authorizes the release of these funds to Attorneys for filing fees and legal representation. These subsequent monthly payments are shared between Outreach Housing and the selected Attorney on a pre-agreed basis. (Lawsuit - paragraph 23-24);

• Defendants represent to consumers that they or their non-lawyer agents review and analyze the homeowners’ mortgage closing documents, identifying violations of federal law, including the Truth-in-Lending Act and Real Estate Settlement Procedures Act, which have occurred. (Lawsuit - paragraph 27);

• Defendants’ putative analyses of homeowners’ mortgage documents for violations of federal law constitutes the unauthorized practice of law in accordance with the principles of the Florida Supreme Court. See State of Florida ex rel. The Florida Bar v. Sperry, 140 So.2d 587 (1962). (Lawsuit - paragraph 28);

• Defendants have engaged in the practice of law by employing Florida licensed attorneys to offer and provide legal services through the Defendants to clients of the Defendants. (Lawsuit - paragraph 29);

• Defendants have engaged in the practice of law by controlling the way Florida licensed attorneys provide legal services to clients of the Defendants. (Lawsuit - paragraph 30);

• Defendants have engaged in the practice of law by controlling the way Florida licensed attorneys are compensated for providing legal services to clients of the Defendants. (Lawsuit - paragraph 31);

• Defendants’ business in offering and providing legal services to the public through Florida licensed attorneys which Defendants engage, control and compensate constitutes the unauthorized practice of law in accordance with the principles of the Florida Supreme Court. See The Florida Bar v. Consolidated Business and Legal Forms, Inc., 386 So.2d 797 (1980). (Lawsuit - paragraph 32).

If, in fact, these activities constitute the unlicensed/unauthorized practice of law, it appears that non-attorney loan modification firms that market and provide "foreclosure defense" services directly to the consumer through the use of forensic loan audits and other activities commonly associated with the work of an attorney have significant cause for concern when operating in Florida, as well as in any other state/jurisdiction that has similar laws regulating the unlicensed/unauthorized practice of law.

Source: Lawsuit: State of Florida v. Outreach Housing, et al.

Postscript:

According to a recent Miami Herald report, at least one attorney who was associated with Outreach Housing is currently under investigation by The Florida Bar. (See State Bar Probe Looks Into Attorney's Role With Embattled South Florida Loan Modification Firm).