Complaints Begin Rolling In Against Florida Attorneys Offering Loan Modifications; Lack Of Legal Representation, Fee Structure Among Concerns

In South Florida, the Miami Daily Business Review reports:

• Gladis Heras [...] thought she was in good hands. Heras said she paid [attorney Daniel] Fox $3,500 in January 2009 to modify her mortgage. Yet months later, the bank told the New York resident it had never been contacted by Fox about the modification. Her story is familiar, according to the attorney general’s office and [Florida] Bar officials. The officials say homeowners most frequently report that lawyers charged them from $1,500 to $5,000 to negotiate lower monthly mortgage payments. And that once paid, the attorneys either stopped answering calls or made no effort to contact the lender.

• On top of lack of representation cases before the AG’s office and the Florida Bar, there also are ethical questions about how lawyers handle foreclosure defense and loan modifications, especially the way homeowners are billed. Some lawyers are being criticized for aggressive fee structures that are tied to the amount owed on the mortgage rather than the scope of work involved. Some lawyers charge homeowners monthly fees until the case is resolved or flat fees billed in monthly installments.(1)

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• Another issue: Some homeowners believe that as soon as they start making monthly payments to an attorney they have legal representation. That is not always the case, [local foreclosure defense attorney George] Castrataro said. Although the payments are in installments, legal representation may not begin until a minimum amount is deposited into a lawyer’s trust account. That could take two to six months.

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• Another pitfall for homeowners who don’t want to do [their loan modification] themselves: Castrataro said some lawyers take on modification cases where they know — or should know — the homeowner doesn’t qualify for a loan modification. After taking a fee and overseeing a needless process, they tell the homeowner the modification was denied. Castrataro says inexperience or taking too many cases is as much to blame as greed for that situation.

For the story, see Record number of complaints target modification lawyers.

For a related story on similar problems faced in California, see Calif. Bar Official: "The Number Of Attorneys Using Their Law Licenses To Essentially Take Money From Unwary But Trusting Consumers Is Astounding!"

For State Bar advisories addressing lawyer conduct in loan modifications, see:

• California Ethics Alert: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications,
• Florida Ethics Alert: Lawyers should be very wary of loan modifiers.

(1) Both fee structures are problematic, said George Castrataro, a former lawyer with Legal Aid Service of Broward County who now has his own firm and does foreclosure defense work. “The fees should be directly related to a reasonable number of hours an attorney spends working on the case,” he said. “The amount often taken is very similar to client mortgage obligation. If it takes two hours to resolve it, that is what it should cost, and not how much they pay in mortgage. That [practice] is in direct violation of our obligations.” UnauthPractOfLawTheta