State Bar Investigator: "Now We're Seeing The Loan Mod People Morph Into The Sue-Your-Bank People" As Scammers Circumvent Upfont Fee Prohibitions

In Sacramento, California, The Sacramento Bee reports:

• Sacramentans struggling to keep their homes increasingly are suing their lenders for fraud, even though judges rarely rule in their favor. Desperation has led some of these homeowners to pay thousands of dollars to people who are not lawyers to help prepare their cases. Others hire attorneys in lawsuit mills that aggressively solicit for clients. "It's the new scam," said Tom Layton, an investigator for the State Bar of California.
• The number of lawsuits filed by individuals against banks and mortgage companies in the Sacramento region has more than doubled, rising to about 250 in the last six months, up from about 115 from the same period two years ago, according to a Bee review of court records in Sacramento and Placer counties.
• Many of the lawsuits are filed by frustrated owners tired of dealing with banks that repeatedly transfer calls or reject loan modifications after a successful trial. But homeowners don't always know what they're getting into when they go to court. Some unscrupulous operators, Layton said, are charging large fees for little work.
• The Legislature barred lawyers and non-lawyers alike from charging upfront fees to file a loan modification; however, there is no ban on collecting such fees for preparing a lawsuit.
• "Now we're seeing the loan mod people morph into the sue-your-bank people," Layton said.

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• Jim Towery, the State Bar's chief trial counsel, said people without a law license should not be preparing lawsuits. "It is illegal," he said. "It falls under the category of the unlicensed practice of law."(1)

For more, see Sacramentans sue lenders to save homes – but few succeed.

(1) See also: Loan Modification and Mass Joinder Lawsuit Scams:

• These charlatans align themselves with unethical and inexperienced attorneys who pay them generous referral fees for signing up clients attorneys. They get these clients to pay thousands of dollars upfront to join mass joinder plaintiff lawsuits without ever meeting an attorney.
• They get these people to pay by guarantying that these lawsuits will be successful. They tell these clients that no mortgage payments are to be made during the several years that it will take for the lawsuit to wind through the court system. They promise balance reductions to below market value. They give their word that the attorneys have already won similar cases and have saved hundreds of family homes through these lawsuits. They are quite convincing as they explain how lenders are afraid of the negative publicity that these mass joinder plaintiff lawsuits generate.