By: CHRIS BLANKINSHIP, ESQ.
Loan mod assistance and representation remains one of the most misunderstood businesses in the market. During my commute to work this morning I heard several ads for loan mod companies promising to lower my principal or find violations in the Truth in Lending Act (“TILA”). What’s worse, each company claims to be the highest regarded in its class or the most respect firm in the nation. They certainly can’t all be right.
Many homeowners are confused as to what their options are for loan modification. Loan mod companies may be financially appealing, but they lack the legal expertise an attorney offers. Unfortunately, the industry is flooded with reports of unethical behavior. As a result, homeowners are looking for knowledgeable representatives who will be accountable if the worst were to happen. This is why hiring an attorney makes the most sense for most homeowners.
Perhaps the single most important reason homeowners hire us is because of the impressive vetting process required of all attorneys. Not only did we sit for the Bar, we took ethics in law school, took a multi-state ethics exam, and participated in an extensive background investigation at our own expense! This weeding process produces an ethical quality you won’t find in another profession except perhaps medicine, and last I checked doctors won’t perform loan mods.
Secondly, as attorneys we are able to competently review homeowner’s financial situations to determine what strategy will best suit each client’s unique circumstances. While a loan mod company may suggest all homeowner’s stop making mortgage payments if their homes are financially underwater, we are able to suggest any number of possible legal remedies.
An additional skill we picked up as early as 1Ls is the ability to apply case law, read statutes, and review documents with a keen technical and legal eye, a skill non-attorneys don’t possess. Having this ability is important because while reviewing home loan documents we’re often looking for technical errors either in the language or representation of a contract whose identification can determine a successful outcome.
Further, lenders are receiving countless calls from people with the same request. As attorneys we are able to bypass the normal communication channels to speak directly with a lender’s legal team. We can leverage our ability to file lawsuits to produce real time savings for homeowners. As attorneys we are able to use our negotiating skills to speak calmly and competently with lenders. No more are our therapeutic qualities needed than when dealing with someone frightened at the prospect of becoming homeless. If filing bankruptcy is the best option, a bankruptcy attorney will at least be able to stay the foreclosure proceedings to keep a client in her home as long as possible.
The popularity of this field of law has attracted many new attorneys and attorneys from unrelated fields. The biggest pitfall for these newcomers is when they fail to maintain proper communication with their clients. A recent CA State Bar article interviewed several homeowners who had hired loan mod attorneys only to find that after the initial consultation they were unable to reach the attorney, a clear violation of all rule 1.4(a) subsections under the MRPC. In the worst cases, attorneys allowed their names to be used to legitimize a business with no intention of performing any legal work. As attorneys, we know one of our highest ethical duties is that of communication. When taking on any case it is important to clearly explain the terms of communications with clients, and to review and manage all expectations in an open and clear manner. A simple call back or email can mean the difference between a happy client and a complaint to the State Bar.
New attorneys face the obvious pitfall of being unknowledgeable and inexperienced. All attorneys owe their clients a duty of competence, and jurisdictions may differ on the types of disclosures necessary before taking on a new client. Similarly, new attorneys must be compliant with rule 1.5 and any jurisdictional modifications regarding fee arrangements and whether they can charge for additional time learning about the loan mod process.
Despite these pitfalls, loan modification is a potentially valuable service that can provide clients with a tremendous upside. When our clients do decide to hire an attorney, it’s important to make full disclosures in order to manage their expectations of both us as attorneys, and the ultimate outcome of the case. This industry is filled with people making outrageous promises. Our clients should always know they can count on us to provide them with the sound legal advice and representation they deserve.
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