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Victim of No Results or Scam Loan Modification? Steps to avoid scams.

I can’t tell you how many of our clients have already paid thousands of dollars to a loan modification company or a loan modification law firm or lawyer, only to have nothing happen. In some cases, the client’s home has already been sold and they don’t even know it until they get a notice of eviction (3 day notice to quit) on their door. There are reputable companies and law firms/lawyers out there putting forth efforts to save homeowners, but there are many that are simply greedy. They pile on as many cases as possible and have legal assistants, paralegals, or former loan officers do all the work.

These companies and law firms may not realize the potential liability associated with case overload. The loan modification arena is a very tricky one. Lenders may tell an assistant that they are postponing a foreclosure, but the trustee moves forward with the sale. There could be certain duties owed to the client and failure to exercise the proper amount of care can result in liability for negligence.

In addition, the State Bar of California and California Attorney General are dedicating significant amounts of staff to investigating and prosecuting anyone who ventures outside the ethical and legal bounds in search of getting rich. There have already been several loan mod companies shut down, but there are also loan modification attorneys that should be shut down. I have personally checked up on some companies advertising as loan modification lawyers here in southern California, only to find that some are not even licensed to practice law in California, have large histories of disciplinary actions from the state bar, or have been working in a completely unrelated field until 3 months ago when they suddenly became a trusted loan modification attorney.

In order to protect yourself, here are a few words of caution:

1) Anyone who tells you that you have to have an attorney to modify your loan is not telling you the truth. You can do it yourself; however, there are many legal issues involved in the process, so you could be doing yourself a disservice to not at least speak with an attorney before moving forward.

2) Beware of “attorney-backed” or “attorney-affiliated” companies. The state bar has already issued an ethics alert stating that these types of companies are not acting within the ethical bounds of the state bar here in California. I don’t know exactly what these words mean, but my understanding is that they have an attorney who may work for the company or is somehow connected to the company, but they never actually review or get involved in your case ever.

3) Do your homework on law firms. There are confidentiality and ethical issues involved in giving guarantees, success rates, and prior cases results, but the attorney or firm should be able to give you an idea how long they have been working in real estate law and what type of experience they have. For example, have they ever gone to court and gotten an order to stop a foreclosure, have they represented clients in bankruptcy court so they are familiar with these interrelated issues, have they actually filed lawsuits for predatory lending, have they postponed existing trustee sales? If you never speak with an attorney at the firm when you are looking to hire them, do you really think an attorney is aggressively going to work on your case? Would you ever go to the doctors office for a serious condition and never actually see the doctor, just do whatever the nurse or assistant tells you to?

If you feel that you have been a victim of these types of scams, you may have legal rights you can pursue.

Chris Barsness, Esq.
Law Office of Barsness and Cohen