subject: Take the latest california dre warning with a grain of salt! [print this page] Take the latest california dre warning with a grain of salt!
TAKE THE LATEST DRE WARNING WITH A GRAIN OF SALT!
Just When the Tide Was Turning Against the Banks... the California Department of Real Estate Comes to Their Rescue!
If you found this essay during your Internet travels or other research, you likely have a basic understanding of, and an interest in, the mortgage meltdown, the collapse of the real estate market, the foreclosure crisis, the billions of dollars in bailout money given directly to banks and indirectly to their CEOs, the tribulations suffered by families who begged for loan modifications, the farce of giving bogus trial loan modifications to borrowers with one hundred and fifty percent (or more ) loan to value ratios, and the reasonless denials for permanent modification after successful completion of a trial modification plan foisted upon borrowers who were ignorant enough to believe that their mortgage lenders would give them a permanent loan modification if they just passed the three-month test known as a trial loan modification.
At law firm of Fransen & Molinaro, LLP, we have represented borrowers in California State and Federal litigation matters against national mortgage lenders and banking institutions for about five years. We know, first hand, that the lenders hire extremely competent and fiercely aggressive counsel for every case brought against them. There are almost no limits to what these well-heeled defense law firms will do to win a case, whether that case is brought by a crackpot plaintiff who downloaded and filed a rambling and incoherent two hundred and seventy-eight page complaint (not counting attachments) drafted by people who believe that the United States Constitution prohibits the payment of income tax or whether that case is brought by a skilled consumer attorney representing an elderly couple about to be evicted as a result of failing to repay a predatory loan which was made in flagrant violation of every state and federal lending law on the books. Lawsuits against lenders are met scorn and ridicule by lenders' lawyers. These zealous advocates of lenders' rights file motion after motion, refuse to provide adequate responses to even the most basic of discovery requests, continue foreclosure and eviction attempts during the lawsuit, practice delay tactics, and make overt threats of countersuit against not only the plaintiffs but personally against the plaintiffs' attorneys.
Those consumer attorneys courageous enough to represent sympathetic plaintiffs who have solid cases find themselves embroiled in time-consuming and expensive lawsuits. The convoluted state and federal statutes governing the mortgage industry constantly change. The State and Federal Court rulings which should act as guide to proper interpretation of these ambiguous statutes more often than not do no more than provide conflicting statutory interpretations based on the personal opinions and whims of appellate judges.
ntil recently, the majority of the millions of troubled borrowers who chose not to sue their lender simply applied for loan modifications, an endeavor akin to the Three Little Pigs begging the wolf to become a Vegan. Seeking only to get affordable monthly housing payments, these homeowners had no desires to get involved in lawsuits that would take years to resolve. Furthermore, these homeowners did not have the enormous amounts of cash that such lawsuits would require. Unfortunately, time has shown that the mortgage lenders were no more lenient with people who applied for loan modifications that with those people that sued. The loan servicers (also known as henchmen for mortgage lenders) have been no less aggressive in their handling of applications for loan modifications than the attorneys who defend the lenders in courts.
Many people who, after months of struggling with their lenders, receive trial loan modifications feel immediate relief, because they believe that their lenders are finally ready, willing, and able to provide affordable monthly payments. However, such exuberance is usually short-lived. Experience now shows that many trial modifications are nothing more than clever ploys to extract extra payments from borrowers just before foreclosure. This scheme provides lenders with an opportunity to control housing inventory and prevent gluts of bank-owned repos from hitting a particular areas all at once, much as dams prevents flood waters by controlling flows. This scheme provides lenders with payments from borrowers that they otherwise would never receive. This scheme provides lenders with a facade to present to the media and governmental officials as part of their efforts to convince others that they really are helping the American People. When trial modifications, as more and more now do, end in rejections and foreclosures, homeowners have very little options left to save their homes. Generally, the only two options left at this end point are bankruptcy or lawsuit.
Faced with the reality that banks are not truly willing to help most people, and faced with the experience that many trial loan modifications are nothing more than scams to extract cash from borrowers right before foreclosure, many consumer law attorneys began representing these borrowers in lawsuits against lenders. Because these borrowers: (1) have the same stories (i.e. "similar fact patterns"); (2) were all victimized in the same way (i.e. "have the same causes of action); and (3) with similar fact patterns and the same causes of action were often victimized by the same lender, these suits are perfect for plaintiff joinder. Plaintiff joinder lawsuits allow multiple plaintiffs to file one lawsuit in which the plaintiffs jointly seek similar relief based on similar fact patters and the same causes of action. In a nutshell, one example of such a lawsuit in this field would allege, through many specific causes of action, that a lender acted in bad faith by representing trial modifications as a step to permanent modification.
Fransen & Molinaro, LLP believes that lenders act fraudulently and illegally when they deny permanent loan modifications to borrowers who paid in full and on time every month during the trial periods. The advantages of plaintiff joinder lawsuits are many and include, but are not limited to: (1) less costs to each plaintiff; (2) less court-time and resources; (3) fewer contradictory rulings and judgments; and (4) more predictable outcomes and thus more reasonable expectations for the parties to the lawsuits. Fransen & Molinaro, LLP believes that such lawsuits are soundly grounded lawsuits, and such lawsuits have a better chance of success for the plaintiff-homeowners than for the defendant-lenders. Our belief is bad news for lenders who practice these tactics.
However, those of you reading this essay should not be worry that honorable banks will collapse or that their highly principled corporate executives will be filing for personal bankruptcy protection. Fear not that deadbeat homeowners who borrowed billions of dollars and who now refuse to repay, because repayment would lay ruin to their highfalutin lifestyles, finally have a legal weapon to use against lenders. The California Department of Real Estate has, once again, come to the rescue of the banks! Just like they did for the banks when troubled borrowers sought legal help with loan modifications, the California Department of Real Estate has lumped the good with the bad - thrown out the baby with the bathwater, if you will - and issued a proclamation which, in effect, states that in matters where attorneys represent consumers against lenders in plaintiff joinder lawsuits, those plaintiffs' attorneys are scam artists.
Visit the following website to read the "Consumer Alert" issued in March of 2011:
The remainder of this essay breaks down (wherein "breaks down" is defined as "commenting on line y line") this "Consumer Alert." The point I am trying to get across to you, the reader, is that while there are many scam artists out there in the real estate and legal fields, there are more honest and hardworking professionals in these groups than scam artists. By scaring people away from the legal profession, the DRE is not doing a public service; in fact, quite the contrary. The DRE is doing a disservice to a public who has suffered at the hands of lenders for the last five years by telling them to avoid lawyers.
"FRAUD WARNING REGARDING LAWSUIT MARKETERS REQUESTING UPFRONT FEES FOR SO-CALLED "MASS JOINDER" OR CLASS LITIGATION PROMISING EXTRAORDINARY HOME MORTGAGE RELIEF"
Wow, quite an attention-grabbing headline. Notice the arrangement of terms which states that "marketers" request up-front money as opposed to the professionals who will be doing the work. This phrasing implies that the advertisers are asking for, and taking, money up front and that no up- front money is going to the people who are doing the work. And, in case you thought that a lawsuit where many plaintiffs sue a defendant was really called a "class action" lawsuit (as is the practice of every single text book in the law library of every single law school), this headline casts doubt on such a term by using the inflammatory phrase "so-called."
"By Wayne S. Bell, Chief Counsel, California Department of Real Estate"
I would like to call Wayne S. Bell, Esq. a "So-Called Chief Counsel," but I won't. Oh, wait, I sort of just did. Never mind. Whether he truly represents the official views and opinions of the Department of Real Estate is a question begging for an answer. There are probably more than a few people over at the DRE who think that banks and mortgage lenders need to suffer substantial legal losses for the mess that they have caused. I hate to think that the entire Department has it in for consumer lawyers and real estate professionals.
"I. HOME MORTGAGE RELIEF THROUGH LITIGATION (and "Too Good to Be True" Claims Regarding Its Use to Avoid and/or Stop Foreclosure, Obtain Loan Principal Reduction, and to Let You Have Your Home "Free and Clear" of Any Mortgage)."
The DRE can't possibly be stating, in the headline, no less, that litigation does not avoid or stop foreclosure, can it? The article following this headline probably carves out those rare exceptions where rogue attorneys make promises of millions of dollars, free and clear McMansions, and Viagra-free all nighters of loving for any and all plaintiffs who "sign up now." Let's see what they mean by reading more.
"This alert is written to warn consumers about marketing companies, unlicensed entities, lawyers, and so-called attorney-backed, attorney-affiliated, and lawyer referral entities that offer and sell false hope and request the payment of upfront fees for so-called "mass joinder" or class litigation that will supposedly result in extraordinary home mortgage relief."
There's that term "so-called" again. How snarky! A derisive term that belongs in an essay like the one you're reading and not a consumer alert from a government agency. Again, I remind you that I'm not defending all attorneys and real estate professionals. I am defending the majority of honest and hard-working professionals who want to earn their livings by helping others. My law firm has encountered many unprofessional and downright dishonest attorneys and real estate professionals over the last few years. However, there are more honest and professional attorneys and real estate professionals out there than otherwise. The bad apples are the exception, and not the rule.
"The California Department of Real Estate ("DRE" or "Department") previously issued a consumer alert and fraud warning on loan modification and foreclosure rescue scams in California. That alert was followed by warnings and alerts regarding forensic loan audit fraud, scams in connection with short sale transactions, false and misleading designations and claims of special expertise, certifications and credentials in connection with home loan relief services, and other real estate and home loan relief scams."
And now, "BAM!"They jump right into it! It appears that the DRE views any professional who have chosen a career in real estate or real estate law and decided to make a living by charging homeowners for his or her professional services is a fraud. Whether it's help with a loan modification, short sale, help reviewing loan documents, or providing legal representation in a Court of Law, the DRE seems to view the majority of these professionals as scam artists. Otherwise, why so many alerts? The DRE must have encountered tens of thousands of these criminal masterminds out there, and that is just in California!
"The Department continues to administratively prosecute those who engage in such fraud and to work in collaboration with the California State Bar, the Federal Trade Commission, and federal, State and local criminal law enforcement authorities to bring such frauds to justice."
Now this one burns my buttocks more than just a singe. My law firm has represented literally more clients than I can recall off the top of my head in actions against real scam artists from loan modification scammers to foreclosure rescue scammers. We have represented consumers against both real estate professionals and other attorneys. In every single matter we worked which involved a DRE licensee committing a foreclosure rescue scam, we reported the wrongdoers to the California Department of Real Estate. My law firm would complete all the paperwork, make copies of all relevant documents, and forward those materials along with a cover letter thoroughly setting forth the illegal activities of the broker or agent licensee. In some instances an inspector from the DRE would call my office to thank me for sending in the complaint and assure me that they would take the matter seriously. However, not one time, did the California Department of Real Estate end up getting my clients back a dime from the scam artists. Not once! Seriously, not one time! My clients were left to file suit - at their own expense - against these entities in small claims court, because my clients had only been scammed out of a few thousand dollars each. Such amounts are enormous to my clients but well below amounts that should end up in Superior Courts let alone hire lawyers to recover. My desperate clients depended on the California Department of Real Estate to work against the true scammers on a case by case basis, weed out the bad apples, and get their money back. Instead, all the DRE did was issue blanket statements, dramatic alerts, and exaggerated warnings to scare everyone away from hiring professionals. This was wrong then, and it's wrong now.
"On October 11, 2009, Senate Bill 94 was signed into law in California, and it became effective that day. It prohibited any person, including real estate licensees and attorneys, from charging, claiming, demanding, collecting or receiving an upfront fee from a homeowner borrower in connection with a promise to modify the borrower's residential loan or some other form of mortgage loan forbearance. Senate Bill 94's prohibitions seem to have significantly impacted the rampant fraud that was occurring and escalating with respect to the payment of upfront fees for loan modification work."
Notice there's no actual statistics - just the use of the term "significantly impacted" as to how much "rampant fraud" was occurring. As long as we're just using generalizations, let me generalize, based entirely on my specific personal experience. What Senate Bill 94's prohibitions did do was remove legitimate lawyers from the field of loan modification. My firm stopped accepting new loan modification cases last year. We did try the "pay later for the hamburger today" model required by Senate Bill 94 (now California Civil Code Section 2944.6) a few times. We did so as a test of our fellow human's ethics. What we found should not have surprised us. More than once, we were successful in modifying a client's mortgage to lower monthly payments, only to have the client verbally thank us for all the hard work and for saving said client's home. However, when the bill for our services arrived, the happy client was dumbfounded and asked how we could expect to be paid when he or she had a mortgage to pay. This did not pan out to be a successful business model.
In addition, after the passage of Senate Bill 94, my law firm saw an increased number of calls from potential clients who fell prey to loan modification scams. Much like making gun ownership criminal does nothing more than make it so that only criminals own guns, the scam artists were happy to see the honest competition removed from their field. As my friends at the NRA accurately point out, "If you outlaw guns, only outlaws will have guns." Faced with less competition from legitimate businesses, the professional conmen stepped up their advertising and made sure to have a web of corporations and entities complex enough to vex anyone who even thought of suing for fraud.
"Also, forensic loan auditors must now register with the California Department of Justice and cannot accept payments in advance for their services under California law once a Notice of Default has been recorded. There are certain exceptions for lawyers and real estate brokers."
While the "forensic loan audit" played a valuable role in mortgage litigation where rescission was a possibility, I do not see a large role for such audits in today's no equity real estate market. Back in the golden days of positive equity, I personally reviewed loan documents for technical violations. The goal of my audit was to find enough illegalities to get the mortgage into court where it could be rescinded. However, as the market tanked, rescission became all but impossible - not because the law would not allow it - but because a home worth half of the mortgage balance is not a candidate for rescission. A forensic loan auditor in today's real estate market is like a VHS deck repairman. On the topic of whether an audit of loan documents looking for missing dates and minor technical violations, I agree with the DRE that such services are much more often than not a waste of money and come with falsely inflated expectations. Only someone well-versed in RESPA and TILA and how those laws are actually used in court rooms can truly know what violations translate into solid lawsuits and which violations are of no significant legal consequence.
"On January 31, 2011, an important and broad advance fee ban issued by the Federal Trade Commission became effective and outlaws providers of mortgage assistance relief services from requesting or collecting advance fees from a homeowner. Discussions about Senate Bill 94, the Federal advance fee ban, and the Consumer Alerts of the DRE, are available on the DRE's website at www.dre.ca.gov. Lawyer Exemption from the Federal Advance Fee Ban -- The advance fee ban issued by the Federal Trade Commission includes a narrow and conditional carve out for attorneys.
If lawyers meet the following four conditions, they are generally exempt from the rule:
1. They are engaged in the practice of law, and mortgage assistance relief is part of their practice.
2. They are licensed in the State where the consumer or the dwelling is located.
3. They are complying with State laws and regulations governing the "same type of conduct the [FTC] rule requires".
4. They place any advance fees they collect in a client trust account and comply with State laws and regulations covering such accounts. This requires that client funds be kept separate from the lawyers' personal and/or business funds until such time as the funds have been earned.
It is important to note that the exemption for lawyers discussed above does not allow lawyers to collect money upfront for loan modifications or loan forbearance services, which advance fees are banned by the more restrictive California Senate Bill 94."
This is where you have to go read the information cited by the DRE for yourself. The federal advance fee ban had a little common sense written into it as it made exceptions for attorneys. However, California's version has no such sensible exceptions, at least none of any value. The State Bar of California provided its interpretation of the California law, and its interpretation made the ban apply in full force to attorneys such that even placing client money into a trust account was prohibited.
"But those who continue to prey on and victimize vulnerable homeowners have not given up. They just change their tactics and modify their sales pitches to keep taking advantage of those who are desperate to save their homes. And some of the frauds seeking to rip off desperate homeowners are trying to use the lawyer exemption above to collect advance fees for mortgage assistance relief litigation. This alert and warning is issued to call to your attention the often overblown and exaggerated "sales pitch(es)" regarding the supposed value of questionable "Mass Joinder" or Class Action Litigation."
Strangely no mention yet that there may be some legitimate attorneys out there who are truly battling the big banks on behalf of abused homeowners. Well, I'm sure the DRE will address how to locate the good attorneys later in this "alert and warning." Let's keep reading.
"Whether they call themselves Foreclosure Defense Experts, Mortgage Loan Litigators, Living Free and Clear experts, or some other official, important or impressive sounding title(s), individuals and companies are marketing their services in the State of California and on the Internet. They are making a wide variety of claims and sales pitches and offering impressive sounding legal and litigation services, with quite extraordinary remedies promised, with the goal of taking and getting some of your money."
Just a thought here, but would it be okay for lawyers with impressive track records to claim to have impressive track records? Or do winners have to pretend to be losers? There's a Charlie Sheen joke in here somewhere, but I don't want to digress. Or do winners have to pretend to be losers lest someone think an attorney who has litigated against banks for years and holds a broker's license be considered anything even remotely resembling an expert in the areas of foreclosure defense or mortgage litigation? If I'm ever in need of a brain surgeon, should I only trust one that really downplays his surgical skills and neuro-anatomical knowledge? Are all doctors who set themselves out to the public as experts or having experience nothing but frauds and practitioners who should be avoided like the plague? Good thing the DRE does not regulate the medical profession.
As for the goal of "taking and getting some of your money," let me go out on a limb here. I know that the lawyers in my law firm are probably the only ones in the entire western half of the United States which practice law to make a living, but it's only because we don't have day jobs. If my high school guidance counselor had just pressured me into shooting for a cushy nine-to-five plus generous bennies with some quasi-governmental agency that oversees highly educated professionals, I wouldn't have to filch money from people in exchange for providing them with knowledge, skill, and experience; Knowledge, skill and experience that came from years of study at a high-priced law school, countless long nights pouring through legal texts (well, it's actually online texts, but they were poured through just the same), and battling unnecessarily aggressive defense counsel with overly inflated egos and psychotic personalities that make Hannibal Lecter seem like the better choice for my next dinner guest. Yes indeed, services such as the ones offered by my firm should be free. Unfortunately, I too have a mortgage and bills to pay.
"While there are lawyers and law firms which are legitimate and qualified to handle complex class action or joinder litigation, you must be cautious and BEWARE. And certainly check out the lawyers on the State Bar website and via other means, as discussed below in Section III."
Ah, finally, the DRE admits that "there are lawyers and law firms which are legitimate and qualified to handle class action or joinder litigation." But, we'll have to wait to read Section III to learn how to locate these legitimate and qualified lawyers and law firms. I await Section III with no less anticipation than an Oxford English professor awaiting Act III, Scene One of Hamlet.
"II. QUESTIONABLE AND/OR FALSE CLAIMS OF THE SO-CALLED MORTGAGE LOAN DEFENSE OR "MASS JOINDER" AND CLASS LITIGATORS."
"LITIGATORS." Yup, you read the last word of the heading for Section II correctly. This is where the DRE unambiguously names the target of this alert and warning. Last I checked, litigator referred to lawyers and attorneys who represented clients in courtrooms. While a pro per plaintiff could also be a "litigator," I don't think the DRE is warning people against hiring themselves. And, of course, we again see that snarky term "so called" being thrown around. Am I the only one who can't read that term without picturing the author scrunching his nose and sneering with more than a bit of self righteousness as he wrote that phrase?
"A. What are the Claims/Sales Pitches? They are many and varied, and include:"
And as we are about to read, the DRE has stooped to impersonating David Letterman doing the top ten list. Only, this one isn't funny on purpose. Allow me turn it into a True or False test.
"1. You can join in a mass joinder or class action lawsuit already filed against your lender and stay in your home. You can stop paying your lender."
This statement is TRUE. One of the key features of a mass joinder action is that the title of the complaint would list "Roes" as plaintiffs. This specifically allows for additional plaintiffs to enter the lawsuit after it has been filed. So, yes. Yes, you can join a mass joinder lawsuit after it has been filed. That's the whole point.
While not everyone would expect to stay in their home, this is something that almost every attorney representing a client being threatened with eviction tries to accomplish for that client. When a client comes to me and states that the bank is trying to take his or her home, I usually see if I can come up with a legal way to keep that person in their home. If I see a viable way to accomplish that goal through litigation, I actually tell the client that my brilliant legal plan is designed to keep him or her in that home. If I cannot find a solid basis on which to bring suit, I tell the client so. Telling a client that he or she has no case against his or her lender is basically saying, "Don't hire me to save your home," and, I am okay with telling clients that news. In fact, more often than not, after meeting with clients interested in suing their lenders, I tell them that they have little if any chance of saving their homes through litigation. However, with regard to the clients I do take, I explain the litigation process and the chances of a successful preliminary injunction to prevent foreclosure and/or eviction. To imply that it's a big red flag if your lawyer tells you that you can stay in your home is reckless and wrong.
s for not paying the lender., News Flash! There's another Charlie Sheen joke in there, but again, I won't digress. News Flash! Most of the people coming to me to save their homes have not made a mortgage payment in months! If they were making mortgage payments their homes would not need saving. Duh! Not Paying! Advising these people not to pay, is really advising them that they don't have to do something that they cannot do.
"2. The mortgage loans can be stripped entirely from your home."
This statement is FALSE. The chances of getting a free house are about the same, if not less, than hitting the Super Lotto. However, there are some legal maneuvers, though more applicable to bankruptcy actions, where the loan amount can be made stripped down to the market value of the subject property. However, bankruptcy filings are not mass joinder or class actions.
"3. Your payment obligation and foreclosure against your home can be stopped when the lawsuit is filed."
This statement is not TRUE or FALSE. There is tricky wording here. The "payment obligation" (i.e., the contractual requirement to pay is in existence until the parties to the contract agree to stop such requirement or until a judge orders such). However, a Court can enjoin a lender from foreclosing during a lawsuit such that even though the borrower does not pay, the lender is barred from foreclosing. However, more and more judges are requesting bonds to be posted to cover unmade payments or requesting payments to be made into a suspense account during the lawsuit. Thus, it may be true that the lender does not get paid during the lawsuit, but payments might still be made. The final word here on this topic, is that it really depends on which court is handling the case, which lender is being sued, the amount of the monthly payment, and most importantly , the seriousness of the underlying claims in the lawsuit.
"4. The litigation will take the power away from your lender."
This statement is TRUE. I'm floored at the utter inanity of the DRE in implying that this statement is misleading. Suing someone gives you power over that person, and takes power away from that person. Me thinks that anyone at the DRE who does not believe me has never been sued. Just ask any of my defendant clients who have been sued whether they feel that they have the power to stop the suit. Even with competent and aggressive defense counsel on your side, it is never fun to be sued and just the fact that someone is sued causes stress and a shift of power. People settle lawsuits even when they did nothing wrong just to avoid further litigation. These situations are called "nuisance lawsuits," and whether or not you would agree that nuisance lawsuits are ethical, only a fool would say that nuisance suits do not get plaintiffs money from defendants.
hen it comes to a professional lender and its billions of dollars of assets and teams of lawyers against your average homeowner, litigation is sometimes the only way to level the playing field. I dare say that it is the rare occurrence when litigation does not take power away from the lender.
"5. A jury will side with you and against your lender."
This statement is FALSE as offered as an absolute but TRUE if offered as opinion. With regard to the plaintiff side of a lawsuit, whether a jury will side with either party cannot be known ahead of time. If a lawyer tells you that you are guaranteed to win your case, then he or she is either overly self-confident or lying. Once a jury gets involved, no one can predict the outcome with certainty. However, attorneys are allowed to make predictions about the outcome of cases. Such predictions are a daily part of every litigator's plans and strategy. During a lawsuit, an attorney should be continually evaluating and reevaluating the strengths and weaknesses of his or her client's case. Such analysis helps identify strengths to be emphasized and weaknesses to be exploited. An attorney really should not take a case that he or she does not believe he or she can win. Thus, it should always be the opinion of the plaintiff's attorney that the jury will side with the plaintiff.
"6. The lawsuit will give you the leverage you need to stay in your home."
This statement is TRUE. Though litigation does guaranty a successful outcome, as stated above, litigation does take power away from the lender. Absent some of its power, a lender may find it more difficult to foreclose and evict. A solidly-grounded lawsuit can provide the leverage needed to better the chances of staying in your home.
"7. The lawsuit may give you the right to rescind your home loan, or to reduce your principal."
This statement is poorly written but probably TRUE. No lawsuit gives you rights. Lawsuits are used to enforce rights that you already have. But assuming that the author meant that a lawsuit won't get your loan rescinded, such a generalization is inaccurate. What is accurate is that if you have a clear cut right to rescind along with the ability to rescind (meaning you have the cash available to make a short payoff), a lawsuit will allow you to rescind (assuming a correct ruling by the judge). If you do not have the financial ability to rescind, it would be like a court saying I have the right to play in the National Basketball Association. For those of you who have had the pleasure of meeting me in person, you would realize that - being only an Italian five foot seven inches and having no athletic ability - I am not physically able to exercise that right.
As for reducing the principal, a rescission would accomplish such a reduction. So, it would be true that if you can rescind, your principal would be decreased. However, I agree that a lawsuit in and of itself will very rarely reduce the principal. Thus, even when rescission is a right, it is rarely a right that can be exercised in today's no equity real estate market.
"8. The lawsuit will help you modify your home loan. It will give you a step up in the loan modification process."
This statement is TRUE. This is a realistic goal of many lawsuits against lenders, and definitely something that should be expected by a plaintiff suing especially when a successful trial modification plan was not approved for permanent modification. People hire lawyers for "help," in the litigation world. I may be going out on a limb here by admitting this, but when I take on litigation clients, I actually tell them I will "help" them.
As for getting "a step up in the loan modification process," anyone who has dealt with the callous and dimwitted agents for mortgage servicing companies and been told to fax their information and documentation repeatedly because the twenty other faxes did not go through, would probably rather apply sulfuric acid to their eyeballs with knitting needle applicators than make another call to the lender. Things go more smoothly when a loan modification is processed through the lender's legal department, and the way to get the legal department involved is through a lawsuit. This does not mean that a frivolous lawsuit will get a loan modification plan approved, but the process of getting from application to decision is much easier when a lender's attorneys is working on the file.
"9. The litigation will be performed through "powerful" litigation attorney representation."
This statement is TRUE. I think so, anyway. I'm not sure how to break down this statement. I think it is safe to assume that litigation is performed by litigation attorneys as opposed to non-litigation attorneys, because the definition of litigation attorney is an attorney who litigates. I also think it's safe to assume that the litigation attorney will be representing the plaintiff client, so that the litigation will be performed through litigation attorney representation.
I guess the DRE has a problem with the word, "powerful." Now, I may not be a physically imposing figure, but I have been called obnoxiously overbearing on more than one occasion. Meanwhile, my law partner Nathan Fransen, who is generally mild tempered despite his Viking roots hits the top of his head on any ceilings lower than six foot four inches even when he's not wearing shoes. Can either of us claim to be "powerful?" Who does get to claim "power?" It's a known fact that attorneys are quite an argumentative and in your face group of people, both as individuals and one-on-one. It's what we are trained to be and paid to do. Again, maybe I might lose my audience with this stretch, but I dare say that if you are a powerless litigator, I suggest a career change.
"10. Litigation attorneys are "turning the tables on lenders and getting cash settlements for homeowners"."
This statement is TRUE. Again, we see the DRE making a distinction between litigation attorneys and those other attorneys who must do something that does not involve court. I am not certain what exactly turning the tables means, but I assume it means taking power away from the lender, so I refer you to my above comments about power being taken from lenders.
There have been cash settlements approved for borrowers as a result of class actions already in progress against lenders. The catch is that, as with most class actions, the amount of cash paid to each individual plaintiff is paltry when compared to the huge amount awarded to the law firm handling the case. None-the-less class actions can turn tables against big businesses because the big businesses pay huge sums of money when they lose.
In one Internet advertisement, the marketing materials say, "the damages sought in your behalf are nothing less than a full lien strip or in otherwords [sic] a free and clear house if the bank can't produce the documents they own the note on your home. Or at the very least, damages could be awarded that would reduce the principal balance of the note on your home to 80% of market value, and give you a 2% interest rate for the life of the loan".
Notice that the phrase "the damages sought." This means that the damages sought include these things. I have read many complaints which seek millions of dollars in damages, but that does not mean that those plaintiffs will win millions of dollars. Complaints often seek much more than would be truly expected, because such damages are within what the law allows. As for the example, the DRE has probably used the worst example it could find. Attorneys should not promise specific successful results, especially when those results are not within the bounds of reality, but again, I point your attention to the idea that those are the damages being "sought" and not the damages that will be awarded.
"B. Discussion.
Please don't be fooled by slick come-ons by scammers who just want your money. Some of the claims above might be true in a particular case, based on the facts and evidence presented before a Court or a jury, or have a ring or hint of truth, but you must carefully examine and analyze each and every one of them to determine if filing a lawsuit against your lender or joining a class or mass joinder lawsuit will have any value for you and your situation. Be particularly skeptical of all such claims, since agreeing to participate in such litigation may require you to pay for legal or other services, often before any legal work is performed (e.g., a significant upfront retainer fee is required)."
This advice should be common sense and apply to hiring an attorney or a roofing contractor. Had this been how the alert started, I may not have been as offended.
"The reality is that litigation is time-consuming (with formal discovery such as depositions, interrogatories, requests for documents, requests for admissions, motions, and the like), expensive, and usually vigorously defended. There can be no guarantees or assurances with respect to the outcome of a lawsuit. Even if a lender or loan owner defendant were to lose at trial, it can appeal, and the entire process can take years. Also, there is no statistical or other competent data that supports the claims that a mass joinder and class action lawsuit, even if performed by a licensed, legitimate and trained lawyer(s), will provide the remedies that the marketers promise."
We are back to bashing the mass joinder suits by stating that there is no statistical or other competent data can provide the remedies promised. Can the DRE show me the statistical or other competent data to show me that these suits do not provide such remedies? The reason there is no proof based on track records in this field is that we have never seen lenders behave this badly before. We have never seen this many homeowners under water with regard to their mortgages. We have never seen this many neighborhoods ruined by foreclosure. We have never seen this many Wall Street tycoons get bailed out while the rest of us suffer financially and emotionally. These are new cases and the results are not yet in.
"There are two other important points to be made here: First, even assuming that the lawyers can identify fraud or other legal violations performed by your lender in the loan origination process, your loan may be owned by an investor - that is, someone other than your lender. The investor will most assuredly argue that your claims against your originating lender do not apply against the investor (the purchaser of your loan). And even if your lender still owns the loan, they are not legally required, absent a court judgment or order, to modify your loan or to halt the foreclosure process if you are behind in your payments. If they happen to lose the lawsuit, they can appeal, as noted above. Also, the violations discovered may be minor or inconsequential, which will not provide for any helpful remedies. Second, and very importantly, loan modifications and other types of foreclosure relief are simply not possible for every homeowner, and the "success rate" is currently very low in California. This is where the lawsuit marketing scammers come in and try to convince you that they offer you "a leg up". They falsely claim or suggest that they can guarantee to stop a foreclosure in its tracks, leave you with a home "free and clear" of any mortgage loan(s), make lofty sounding but hollow promises, exaggerate or make bold statements regarding their litigation successes, charge you for a retainer, and leave you with less money."
Wow, this paragraph is chock full of baloney mixed with filet mignon. Nathan and I have lectured and written extensively on the topic of mortgage fraud. When we lecture, these lectures often give a brief overview of the topic, and even when we only provide an overview our lectures last for an hour or two. We have studied the causes of action borrowers have against lenders, and the constantly changing case laws which result from the thousands of mortgage litigation suits being filed each month. Let me tell you one thing with one hundred percent certainty, I would not even attempt to sum up the litigation mess in one paragraph. The DRE has done exactly what it criticized the marketers for doing - taking a bit of truth and mixing it with inflammatory hyperbole to make a point and persuade the audience to take a specific action.
Look, all lawsuits are more complex than the public would guess. This is why lawyers study for years only to get a license to "practice." Yes, there are scam artists out there. However, that does not mean that you should lay down and let the bank violate your rights and take your home. If you need a lawyer to save your home, take the time to investigate that lawyer, visit that lawyer's office, meet that lawyer, and his or her staff. Only after you have developed a sense of trust and confidence in that lawyer should you hire that lawyer.
"III. THE KEY HERE IS FOR YOU TO BE ON GUARD AND CHECK THE LAWYERS OUT (Know Who You Are or May Be Dealing With) - Do Your Own Homework (Avoid The Traps Set by the Litigation Marketing Frauds)."
Finally, the DRE will tell us how to avoid the scams and find the good lawyers!
"Before entering into an attorney-client relationship, or paying for "legal" or litigation services, ascertain the name of the lawyer or lawyers who will be providing the services. Then check them out on the State Bar's website, at www.calbar.ca.gov. Make certain that they are licensed by the State Bar of California. If they are licensed, see if they have been disciplined."
I fully agree with the first sentence. At the very least, you should know your lawyer's name. However, I don't think you will need to go through an arduous process to "ascertain" this information. I bet you could just ask. I also agree with checking the State Bar website. This has a list of all licensed attorneys, and it really is a good idea to make sure the person whose name you just ascertained really is lawyer. However, not all discipline means you should avoid that lawyer. Serious disciplinary actions often result in loss of license. So, if a lawyer is still practicing yet has a disciplinary comment on his or her State Bar record, it may be for an infraction as minor as not paying State Bar dues on time. Read the comments carefully and ascertain what exactly the disciplinary action was.
"Check them out through the Better Business Bureau to see if the Bureau has received any complaints about the lawyer, law firm or marketing firm offering the services (and remember that only lawyers can provide legal services). And please understand that this is just another resource for you to check, as the litigation services provider might be so new that the Better Business Bureau may have little or nothing on them (or something positive because of insufficient public input). Check them out through a Google or related search on the Internet. You may be amazed at what you can and will find out doing such a search. Often consumers who have been scammed will post their experiences, insights, and warnings long before any criminal, civil or administrative action has been brought against the scammers."
The Better Busiess Bureau? This has to be a joke, right? Let me just say, before believing anything written by the Better Business Bureau do a Google search on the term "Better Business Bureau" and maybe add the term "Wolfgang Puck" to that search to get an education about the Better Business Bureau. I would write more, but I am afraid of them. Oh, and for the record, we did not pay them a dime for the rating we have. Not even a penny. We refused to pay them even after their "sales agents" kept calling to sign us up.
Doing a Google search is sometimes a good way to learn about the experiences of others with regard to a business or law firm. However, keep in mind that one pissed off consumer will post many negative reviews on multiple sites while one happy customer might only tell his or her best friend about the great experience. Also, there is often no way to verify whether a negative comment is from a real customer or a crafty competitor.
"Also, ask them lots of specific, detailed questions about their litigation experience, clients and successful results. For example, you should ask them how many mortgage-related joinder or class lawsuits they have filed and handled through settlement or trial. Ask them for pleadings they have filed and news stories about their so-called successes. Ask them for a list of current and past "satisfied" clients. If they provide you with a list, call those people and ask those former clients if they would use the lawyer or law firm again. Ask the lawyers if they are class action or joinder litigation specialists and ask them what specialist qualifications they have. Then ask what they will actually do for you (what specific services they will be providing and for what fees and costs). Get that in writing, and take the time to fully understand what the attorney-client contract says and what the end result will be before proceeding with the services. Remember to always ask for and demand copies of all documents that you sign."
I agree that a client should ask lots of questions. When a client hires a lawyer, it is a partnership. The lawyer is one partner and the client is the other. Both partners need to do the work and understand what they are doing. Tell your lawyer everything he or she needs to know, and make sure you learn what you need to know.
As for a client list. Client identities are often confidential. My law firm has represented some people who specifically told us not to provide their names to anyone other than those people directly involved in the lawsuit. Each lawsuit is unique, and often a result of very personal matters. Clients are often not willing to share their experiences. The services provided to someone losing his or her home or filing bankruptcy are not joy-filled experiences like having a new swimming pool installed. You can ask a pool contractor for a list of happy clients, but this is not applicable to the field of law.
"IV. CONCLUSION.
Mortgage rescue frauds are extremely good at selling false hope to consumers in trouble with regard to home loans. The scammers continue to adapt and to modify their schemes as soon as their last ones became ineffective. Promises of successes through mass joinder or class litigation are now being marketed. Please be careful, do your own diligence to protect yourself, and be highly suspect if anyone asks you for money up front before doing any service on your behalf. Most importantly, DON'T LET FRAUDS TAKE YOUR HARD EARNED MONEY."
This should have been the whole consumer alert. Let me sum it up even better. Only hire a lawyer that you have met in person or personally interviewed to represent you in Court and only after you have a clear understanding of what you have hired that lawyer to do and what you should expect as a result. Even more concise, if it seems too good to be true, it probably is.
As for my closing comments, if you got the idea - while you read this essay - that I am trying to persuade you to call my law firm to sue your lender, don't call. While my firm was ready, willing, and more than capable to handle plaintiff joinder actions against lenders - and we were, in fact specifically look for plaintiffs who had been granted trial loan modifications, paid on time and passed the trial only to be denied permanent modification - we are no longer seeking such cases.
Let me explain why we are not seeking such cases. It is not because we think these cases are weak. It is not because we believe that hiring us would not give your leverage against your lender. It is not because hiring us would not take power away from your lender. It is because we see the area of mortgage litigation ending the same way as the field of loan modification.
If you remember, loan modifications were a brand new phenomenon in 2006 when a few attorneys were helping clients to lower their mortgage payments. When the scam artists realized that people would pay three thousand dollars or more for a loan modification, they rushed into the field. The DRE made a list of loan modification companies to avoid. Next, the DRE created rules for DRE licensees to follow if those licensees wanted to legally do loan modifications. The State Bar of California followed suit in its oversight of attorneys and came down quite hard on any attorney who even dared to publicly offer loan modification services. Next, the Federal Trade Commission, the Federal Bureau of Investigations, and the State and Federal District Attorneys Offices started cracking down on anyone in the field. The result was that most legitimate professionals left the field of loan modifications.
I see the same process about to happen to any attorneys who take on mass joinder plaintiffs. My prediction? In the next few months, the DRE will have a list of so-called mortgage litigation companies to avoid. Then the State Bar will start cracking down on so-called mortgage litigation attorneys. Then the FBI, the FTC, and the rest will swoop in. The result will be statutes that prohibit attorneys from charging money up-front to take on these expensive, complex, and time consuming litigation cases. And to that, I say no thanks. I'll get off the bus right here, while I am unhurt, before it's too late. To those of you with good cases - here comes the swan song - good luck.
If the lenders have their way, borrowers will avoid lawyers and the lenders will never be held accountable for the abuses they have committed. I do not agree with the slangy and informal style of the DRE's alert and warning because it comes across as simplistic, condescending, inflammatory, and paternalistic. Do not let the DRE scare you away from seeking legal help from legitimate lawyers. They are out there.
