300 California law firms investigated for mortgage modification scams

By Chip Parker, Jacksonville Consumer Attorney on Jan 25, 2010 in Foreclosure Defense, Mortgage Modification

As a Florida foreclosure defense attorney who personally meets with 25 new distressed homeowners every week, I am often the second lawyer consulted about the foreclosure.  The first lawyer is usually a California lawyer promising a mortgage modification, and the outcome is always the same: My clients complain that they got absolutely nothing for their money – often thousands of dollars are lost.

California has had it rough.  It has skyrocketing unemployment and is the home of the Option ARM foreclosure wave.  In this climate, it is no wonder that California boasts the largest number of lawyers committing fraud on the Middle Class through the operation of illegitimate mortgage modification scams.

In a recent article by Fresno Bee reporter Barbara Anderson, The California Bar Association is fielding an alarmingly high number of complaints from clients who say their lawyers illegally withheld settlement money or charged them for work they didn’t do — especially those who promised help modifying mortgages.

According to the report, “The Bar is investigating more than 300 California lawyers involved in loan-modification rip-offs. Typically, homeowners facing foreclosure complain that they paid attorneys who then did nothing to help them keep their homes.”

This is not to say that lawyers from Florida and other states aren’t also ripping of panicked homelosers.  I see lawyers right here in Florida doing the same thing.

The bottom line is this:  DO NOT HIRE A LAWYER TO MODIFY YOUR MORTGAGE UNLESS THE LAWYER PLANS TO ACTUALLY DEFEND THE FORECLOSURE IN STATE COURT.

Mortgage modifications rarely work because the terms never go far enough to solve the long-term problem – massive negative equity.  The only way a homeowner can eliminate negative equity is by convincing the “lender” that doing so is in the “lender’s” best interest.  This ONLY happens by fighting the foreclosure in the state court case.  A good litigator can shift leverage away from the lender and toward the homeowner, forcing the lender to offer more meaningful solutions.

Lawyers who only do mortgage mod workouts with the loan servicer – dubbed by real lawyers as “HAMPsters” – do a disservice to their clients.  The client will rarely if ever achieve a long-term solution that will ensure the foreclosure won’t come back anytime soon