Recent Blog Posts

SHOULD YOU HAVE YOUR NEW LOAN DOCUMENTS REVIEWED BY AN ATTORNEY?

Fransen & Molinaro — Wed, 18 May 2011 01:23:00 GMT

If you've even been half paying attention to the media coverage on mortgage litigation lately, you have probably heard about getting a loan document "audit." This is where you pay thousands of dollars to some self-titled called forensic loan auditor to prepare a nonsensical report that identifies de minimis technical violations in your stack of loan documents from a loan you did five years ago - a report that you are told to take to an attorney and sue your lender into submission to get the loan modification that you deserve. You know that one? Well, that's not what this article addresses. What this article does address is the question of whether it's worth having a competent knowledgeable and qualified attorney explain the complex language of your loan documents to you before you sign on the line which is dotted. Five years ago people did not even blink at the fact that their loan officer got huge amounts of money for selling them a predatory loan.

Allow me a small digression into the loan business - a "point" is what loan officers charge to do loans, and one point is one percent of the loan amount. That is, if your loan was $600,000.00, one point was $6,000.00. Thus, earning one point for shuffling some papers and entering some numbers and data into a computer program would be pretty good money. However, many loan officers would not charge just one measly little point. They would charge a few points on the front end of a loan plus get a few rebate points on the back end. The more toxic the loan, the more back end points were paid. If a loan officer could talk you into a hard three-year prepay, then he could earn some extra back end points. If he could jack up the interest rate, he could earn some extra back end points. If he could steer you into an option arm instead of the fixed rate mortgage you really needed, he would earn some extra back end points.

Loan officers only get paid when the loan funds, so it would take the epitome of honesty to put a borrower's best interests ahead of his personal bottom line. There was one owner of a large mortgage company who used to say that his favorite sound in the whole wide world was "the cold hard slap of five points" on some unsuspecting borrower. That's right… five points… or $30,000.00 on one $600,000.00 loan. Back in the heyday of mortgages, selling one loan a month was done without even trying - and that means some serious cash was made.

Even in today's market, loan officers only get paid when a loan funds. The mortgage meltdown has made many people exercise caution when obtaining a new mortgage (whether to buy a home or refinance). However, I would bet that most people still don't understand their loan documents as well as they would like. If you are buying a $300,000.00 house and your loan amount is $240,000.00, you might get lucky and pay your loan officer just two points ($4,800.00). The question you might want to ask yourself is whether it's worth paying an attorney to provide independent and unbiased information about the loan and the loan documents before you sign. The attorney who is paid for time and advice has no incentive to give you bad advice or tell you that a loan is good when it is not. A good mortgage attorney could review your loan documents and explain your loan's terms to you in plain easy to understand language in about an hour. The cost for such an education might be about $300.00, or just 6.25% of the amount you will pay the loan officer - that's less than sales tax in most counties.

If you are buying a home or refinancing, your loan officer might call you at the last minute of the last day you need to sign your loan documents to tell you your loan documents are all ready to sign. He will tell you that the documents are time sensitive and have to be signed right away or they will expire and need to be redrafted. And, if that happens, your interest rate will go up. This kind of time pressure should raise your suspicion. Consider telling your loan officer that you will be talking all of your loan documents to an attorney for review. Many attorney's offices have a notary public on site, so you can not only review your documents with the attorney and become educated about but your loan but sign your documents at the same time. Thus, you can tell your loan officer that you will have everything signed and returned to him in a day.

In my opinion, the money you spend for an hour of attorney time is well worth it when compared to the money you are pay your loan officer and when compared to the amount of money at stake if you get loan terms that are not what you wanted. It is also my opinion that if your loan officer tells you that you are wasting your time and money by getting a lawyer's review, then a red flag has been raised about that loan officer's integrity.

Of course, as a real estate and mortgage attorney, I am biased, so the above is just my opinion. However, even my biased opinion is sometimes right. My law firm charges $300.00 for a one hour loan document review and consultation, and same day appointments are often available for such services. We will review documents for individual borrowers, or for the clients of real estate agents. If you are a real estate agent who wants to offer your buyer clients an additional source of information and advice, consider paying our fee for your clients. Instead of buying your client some ugly house warming gift that will end up being re-gifted, you can buy your clients piece of mind. Heck, you can deduct the amount from your commission, and it would hardly be missed. Bottom line? Whether you hire my law firm or another, an hour of attorney time is well worth the investment when you are talking about hundreds of thousands of dolars.

- Paul

Paul J. Molinaro, M.D., J.D.
Attorney at Law, Physician, Broker
Fransen & Molinaro, LLP
980 Montecito Drive, Suite 206
Corona, CA 92879
(951)520-9684

** This post and all others I make on Internet are for informational purposes only. None of the information or materials I post are legal advice. Nothing I post as comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.

SHORT SALE VERSUS FORECLOSURE

Fransen & Molinaro — Sat, 09 Apr 2011 22:46:00 GMT

This article discusses California foreclosure laws in very general terms and omits many specific nuances which may make such laws inapplicable to you. California foreclosure laws are complex and every-changing. Thus, only an extremely large textbook would even begin to explain their intricacies. The following is presented just to provide you with a very basic foreclosure and short sale education.

California law prohibits a foreclosing lender from holding a homeowner personally liable for the debt of a first mortgage after foreclosure on that borrower’s primary home that has never been refinanced. Thus, whether such a home is lost through foreclosure or short sale, the lender may not "go after" the borrower for any money on the first mortgage.

California also has a "security first" law that requires lenders to seek recovery from the security before holding borrowers personally liable debts.

However, such laws do not apply to a primary home that has been refinanced for cash out and has multiple mortgages. These cash out borrowers may have personal liability for the debt on their second mortgage even after foreclosure on a primary house.

To further complicate any understanding of these laws, a short sale is different from a foreclosure. The difference means that personal liability for a debt which may not have been present after foreclosure may exist after a short sale. Some short sales leave a homeowner to face personal liability for the difference between the sale price and the amount owed on the mortgage.

Because brokers and agents are paid only if a sale goes through, they may not provide impartial advice as to whether a short sale is in the best interests of a cash-out borrower. If you have decided to let your house go you need dependable and unbiased advice, because you need to choose carefully between foreclosure and

short sale. Assuming you have no personal liability for your mortgages, you could take whichever choice would allow you to stay in your home for the longest period of time. In general, a short sale can allow you to stay in your home for a longer period of time. Lenders benefit from short sales as homes sold at short sale often sell for more than bank-owned properties. Sales of bank-owned properties drive down prices in entire neighborhoods.

However, if a short sale might leave you with personal liability, you should determine whether there are any ways you can eliminate or minimize that liability. A Fransen & Molinaro mortgage attorney can provide an honest opinion about the advantages and disadvantages of short sale versus foreclosure. Because we are paid hourly, our advice can be considered unbiased as opposed to people who are paid only "when the deal closes." Call us now for information you can trust.

Paul J. Molinaro, M.D., J.D.
Attorney at Law, Physician, Broker
Fransen&Molinaro;, LLP
980 Montecito Drive, Suite 206
Corona, CA 92879
(951)520-9684
** This post and all others I make on Internet are for informational purposes only. None of the information or materials I post are legal advice. Nothing I post as comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.

LOAN MODIFICATION & MASS JOINDER LAWSUIT SCAMS

Fransen & Molinaro — Sat, 09 Apr 2011 20:24:00 GMT

     You don’t need to read this article to learn that, over the last three years, many California homeowners have fallen victim to scams involving loan modification scams, foreclosure rescue, and “mass joinder” plaintiff lawsuits. The desperation created by our country’s economic collapse has given predators the opportunity to con homeowners out of their hard-earned money with false hopes of saving their family home.
     While most real estate and legal professionals are noble and take pride in helping people through difficult times, there remain that bottom few who give a bad name to these industries. Some of these con artists honed their skills during the real estate bubble when they peddled the toxic loans. When the mortgage industry imploded, these and unscrupulous brokers and loan officers found themselves suddenly unable to earn tens of thousands of dollars each month. They now use their experience at high pressure boiler room sales techniques to sell loan modifications and sign up clients for law firms.
     These swindlers advertise themselves as foreclosure prevention experts who use insider knowledge of the mortgage business to obtain loan modifications which cut loan balances, obtain low fixed interest rates for the life of the loan, and immediately stop any foreclosure action.
     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.
     Eager to save their home and lured by the idea of gaining power over the lender that has been victimizing them for years, these people pay thousands of dollars without truly understanding what they are getting, and more importantly, what they are not getting. The truly disturbing result of these scams is that the legitimate real estate and legal professionals are falsely accused of being just as crooked as the actual crooks. With so many scam artists in the field, people quickly start to believe that there are no honest real estate professionals or lawyers. This is a grave mistake that prevents people who really need help from seeking such help, and a mistake that lets the lenders continue to abuse the public without any fear of accountability.
     You should never pay money to any attorney that you do not meet in person. You should never pay money to a non-attorney for legal services. While a money-back guaranty is not a sign of dishonesty, you should not trust anyone who promises absolute success in the areas of loan modification or litigation.
     At Fransen & Molinaro, LLP one of our experienced attorneys meets, personally and one on one, with every client we represent. Our attorneys will explain not only all the benefits you will get by hiring us, but also explain what will not happen when you hire us. If we do not feel that we can save your home, we will tell you so. We do not tell our clients what to do. We present options, often ones that our clients did not know existed. We help clients set achievable goals, and then help our clients to achieve those goals. Oh, and yes, we do represent clients who have been scammed by real estate professionals and attorneys.

POST FORECLOSURE LIABILITY – WILL LENDERS GO AFTER BORROWERS?

Fransen & Molinaro — Sat, 09 Apr 2011 20:12:00 GMT

California's anti-deficiency laws were written to prevent: (1) multiplicity of actions; (2) overvaluation of the security; (3) worsening an economic recession by holding debtors personally liable after losing their homes; and (4) allowing creditors to low-ball bids at the foreclosure sale to acquire property below market value and then go after the borrower for money.

Such laws bar deficiency actions for purchase money loans on a primary residence and also bar deficiency judgments after a non-judicial foreclosure. Such laws mean that whether a primary residence (that has not been refinanced) is lost to trustee's sale or non-judicial foreclosure, all a lender can do is foreclose on that home.

Furthermore, California's "security first" rule requires a lender to go after the security (the home) first, that is, before going after the borrower for money, a lender should foreclose. In certain circumstances, foreclosure on the security is a lender's exclusive remedy, and no deficiency judgment can be obtained afterward.

While many primary homeowners have no worries about deficiency judgments, those who refinanced, have second mortgages, own investment property, or own commercial real estate may have reason to fear personal liability. The anti-deficiency statutes may not be applicable to these property owners, because the lender may have the ability to sue the borrower in court for repayment of the loan amount or any portion thereof that was not recovered through foreclosure.

Fransen & Molinaro, LLP has been receiving more and more calls from people who lost real estate to foreclosure or short sale and now face collection actions from the lender for money. When we meet with these people, we are able to determine whether such a debt is collectable, and if so offer advice on how to handle collection efforts. If such a debt is not legally owed, we can represent that borrower and let the lender know that any further collection actions will be met with legal action under the state and federal debt collection laws. If such a debt is collectable, we will offer advice and representation through bankruptcy, debt settlement, or litigation defense.

In closing, one point that is important to take away from this article is that legal advice and representation with regard to liability for deficiency after foreclosure is better when obtained well in advance of the foreclosure. The reason to seek legal help prior to foreclosure is that, negotiating down a legally owed debt or defending a valid lawsuit is much more difficult than taking preemptive steps to avoid the debt. For example, under some circumstances the short sale process may avoid deficiency actions.

If you are faced with hundreds of thousands of dollars in real estate debt, paying for an hour of time to discuss your rights and liabilities with a Fransen & Molinaro, LLP mortgage attorney is worth the time and expense.

TAKE THE LATEST DRE WARNING WITH A GRAIN OF SALT!

Fransen & Molinaro — Tue, 29 Mar 2011 23:40:00 GMT

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.

Until 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:

http://www.dre.ca.gov/pdf_docs/ca/ConsumeAlert_WarningreMassLitigation.pdf

The remainder of this essay breaks down (wherein “breaks down” is defined as “commenting on line by 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.

As 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.

When 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 Business 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.

Paul J. Molinaro, M.D., J.D.

Attorney at Law, Physician, Broker

Fransen&Molinaro;, LLP

980 Montecito Drive, Suite 206

Corona, CA 92879

(951)520-9684

CALIFORNIA AND DEBT SETTLEMENT SCAMS

Fransen & Molinaro — Thu, 27 Jan 2011 01:30:00 GMT

Along with the recession, depression, slump, downturn, economic reset, crash, or whatever euphemism used to describe the massive consumer debts now facing many Californians, came squads of scammers looking to make quick bucks by promising to solve personal financial problems. These scam artists push their "services" through radio, television, mail, internet, and cold calls. When faced with overwhelming debts, thought processes get paralyzed, and desperation overrides good judgment and common sense. Conmen take full advantage of this phenomenon by pretending to be compassionate professionals who can solve enormous financial problems for just a few easy and affordable payments.

If you have overwhelming debt, there are legitimate places to seek help. However, telling the help from the harm can be difficult. The clichéd rule of using extreme caution when something sounds too good to be true should be followed. Some key points to keep in mind are:

Cents on the Dollar
Credit card companies do settle debts for fractions of the amounts owed, but those amounts are often between 35% to 40% and not "ten cents on the dollar." Once in a great while a debtor will accept a 10% short payoff, but the stars must align just right for this to happen, and such a great outcome should not be expected.

Good Apples
There are legitimate debt settlement companies who are very good at what they do, but you need to thoroughly research a company before hiring it. Use personal referrals from trusted family members or friends when possible. Surf the Internet to search for reviews and complaints on the company you are considering. Meet the staff personally at their corporate business office noting the condition of the office and the personalities of the employees. You need to develop a reliable sense of whether you can trust them with your finances.

Lawyers and Non-Lawyers
If you do not need or want any legal advice, then hiring a non-lawyer might save money. However, if legal advice is needed, only a lawyer can provide such advice. Having a law degree does not guaranty legitimacy, but a California lawyer must be a member in good standing with the State Bar of California to practice law. Becoming a lawyer and setting up a law firm is not something that can be done in a "fly by night" fashion. Lawyers can lose their bar card should they be found responsible for unethical behavior. Lawyers usually have malpractice insurance to cover them in the event of certain problems. In addition, a debt settlement law firm should also practice bankruptcy law. A complete evaluation of the benefits and effects of filing bankruptcy should be part of the initial meeting with any law firm promising to help you settle your debts. Only an attorney can provide legal advice with regard to bankruptcy law.

Credit Scores in the Toilet
When debts are paid late, or not paid at all, credit scores plummet. When creditors get paid only a portion of what they are owed, they tell the credit agencies. Those agencies then decrease the scores to reflect the fact that debts have not been paid in full. Short paying debts causes credit scores to suffer substantial decreases. You should expect this effect.

With regard to how much you should pay a telemarketed company, and when you should pay, for debt settlement services, as of October 27, 2010, the Federal Trade Commission has prohibited for-profit companies that sell debt relief services over the telephone from charging a fee before settling or reducing unsecured debt. Some debt settlement companies require monthly payments to be made so that a lump sum can offered to creditors as the monthly payments accumulate. These payments should be kept in a bona fide trust account, and a full accounting should be available upon request. Some attorneys 0charge hourly for debt settlement services allowing you to use the attorney for as much help, or as little help, as you need. Some people just want an "attorney letter" sent to their creditors to get the process started. Other people want the attorney to handle everything from beginning to end.

As with most things in life, debts are negotiable. Knowledge based on education and experience makes all negotiations easier and more effective. Unless you have the time to educate yourself and to gain experience before working on your own debt negotiations, you may find it more cost effective to hire someone else.

If you have been scammed by a debt settlement company, you may have two problems: (1) you still have your debts and (2) you need to get your money back. Contact a local attorney to learn how to handle your debts and whether you have any recourse against that company.

- Paul

Paul J. Molinaro, M.D., J.D.
Attorney at Law, Physician, Broker
Fransen & Molinaro, LLP
980 Montecito Drive, Suite 206
Corona, CA 92879
(951)520-9684

THOSE NAUGHTY DEBT COLLECTORS

Fransen & Molinaro — Thu, 20 Jan 2011 23:50:00 GMT

Debt collectors are heavily regulated by federal and California state laws. The California Fair Debt Collection Practices Act (California Civil Code Section 1788.30, also known as the Rosenthal Act) mirrors the federal Fair Debt Collection Practices Act (15 U.S.C.A. Section 1692k). Such strict governance is required to control a field where threats and offensive language are known to be very effective tactics to extract payments from debtors.

Creditors (the actual parties owed money) and debt collectors (agents hired by creditors to collect money owed to those creditors) have always had to deal with debtors (the parties who owe money) who can't or won't pay their debts. It should come as no surprise that sweet talk is much less effective than threats, personal insults, and relentless harassment when attempting to collect money. However, both federal and California law prevents such actions, and the financial penalties for violations of these laws are severe.

As an example of behavior that is prohibited, a debt collector may not use or threaten to use violence or any other criminal means against anyone's physical person, reputation or property. (See 15 USC Section 1692d(1)). The Federal Trade Commission has noted that even the statement, "We're not playing around here - we can play tough" is prohibited. In addition, using obscene or profane language is prohibited. (15 USC Section 1692d(2)). Some specific examples cited in court reports include a creditor asking a creditor if she was "old and senile" and accusing her of "just sitting on [her] behind doing nothing, collecting a social security check." Likewise, a debt collector may not call the debtor a "liar" or "deadbeat." Using religious slurs or racial/sexual epithets is similarly prohibited.

Debt collectors may not call debtors between the hours of 9:00 p.m. and 8:00 a.m. (15 USC § 1692c(a)(1)). Though a specific number is not given, debt collectors may not call debtors so many times in one day that the calls become harassing in and of themselves. Debt collectors may not call a debtor's family, friends, or employer to embarrass the debtor into paying.

The penalties for violations can range from a statutory award of one hundred dollars ($100.00) to one thousand dollars ($1,000.00) per violation, plus actual damages (including emotional distress damages), punitive damages, and all costs of suit including attorneys' fees. Though damages for emotional distress and punitive awards are not usually awarded, courts are quick to award the maximum statutory penalties and attorneys' fees. Thus, bringing a law suit against an abusive creditor or debt collector can be an effective means to stop the abuse.

Do not let creditors push you around. If you feel you are the victim of abuse or harassment by creditors or debt collectors, consult an attorney to learn about your rights. You will likely discover that you have many more protections and rights than you thought you did.

- Paul

Paul J. Molinaro, M.D., J.D.
Attorney at Law, Physician, Broker
Fransen&Molinaro;, LLP
980 Montecito Drive, Suite 206
Corona, CA 92879
(951)520-9684

** This post and all others I make on Internet are for informational purposes only. None of the information or materials I post are legal advice. Nothing I post as comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.

ONLY A FOOL PAYS THE MORTGAGE!

Fransen & Molinaro — Thu, 21 Oct 2010 23:01:00 GMT

Not too many years ago, this headline would have sounded ridiculous. However, such sentiment seems to be gaining traction outside of the fringe anarchist groups that would normally espouse such behavior. Before the real estate market went haywire, a borrower who did not pay the lender lost his or her home to foreclosure. Nowadays, we see lawsuits by homeowners to stop foreclosure, law suits and injunctions by state attorney generals to halt foreclosures, and lenders voluntarily placing moratoriums on trustee’s sales – even when the homeowners have not paid the mortgages.

There are several fears that make people pay debts: (1) credit scores get pummeled when debts are not paid; (2) unsecured creditors will sue, then garnish wages and clean out bank accounts of deadbeats; and (3) secured lenders will take the collateral property whether it is a car, boat, or home. Once a person decides that maintaining a high credit score is worthless and files for bankruptcy to avoid personal liability for debts, all that is left to make that person pay the mortgage is fear of losing the home. Take that fear away, and the only reason to pay the mortgage might disappear as well. Anyone who has kept up with the latest mortgage news should be asking himself or herself, “If the bank cannot take my home, why the heck would I pay the mortgage?”

This article is not advocating any particular action with regard to payment of any debt. The purpose of this article is to provide the reader with additional factors when considering whether to pay or not pay the mortgage. Furthermore, I am a California attorney, and I have written this article to provide general information for Californians. As such this article may not apply to any other states. Also, I am using very general terms in this article so that the layperson can easily understand the points made. I may use lender and bank interchangeably, and while technically not correct, the point is the same. In addition, the following disclaimer is made: “This article is for informational purposes only. None of the information or materials presented herein is legal advice. None of the comments, answers, or other communications herein should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.”

In general the California mortgage documents allow the lender to sell the debt (and its rights and obligations) to anyone, but the borrower may not transfer the debt (or any of its rights and obligations). This means that if you initially borrowed from Bank of America, Bank of America could sell your loan to Wells Fargo who could sell it to Chase and so on. However, you cannot have someone take over your mortgage and escape the obligations under that mortgage. The banks can transfer the mortgages, you cannot.

When lenders transfer mortgages, certain strict rules must be followed, and such procedures involve creating a genuine and authentic paper trail of such transfers. Certain documents that are used to transfer a loan from one bank to another require actual human signatures from authorized bank representatives. In the last few years, lenders have sold and resold loans in record numbers. As a result banks decided that the money used to pay an actual person to read and sign several thousand repetitively worded documents could be saved by having many people sign the same agent name or use stamped signatures or digitally reproduce signatures. This process has been called “robo-signing” by our media. These robo-signed transfer documents may not be valid. Absent a valid documentation of transfer, there cannot be a valid transfer.

Another cost saving device used by lenders to save money was to use the Mortgage Electronic Registration Systems (“MERS”) to act as trustee for all of the lenders as the loan went from lender to lender to lender. Since the trustee’s identity did not change, there was no need to notify the borrower every time the lender changed. Thus there was savings in printing, record keeping, and postage. Additional savings resulted because no change of trustee documents needed to be recorded, meaning no recording fees to the county recorder offices. MERS essentially became a privatized recorder of real property transactions. Some municipalities estimate the lost revenue in the hundreds of thousands of dollars from not receiving recording fees. In addition, robo-signatures were employed in transfers between MERS and some lenders. Thus, the robo-signed trustee’s deeds may not be valid. Absent a validly assigned trustee, there cannot be a valid trustee’s sale.

California allows trustee’s sales to proceed without court oversight. To ensure compliance with the sale there are many statutory laws which must be followed to the letter. Prior to recording a Notice of Default and Notice of Trustee’s Sale with the County and serving said notices on the borrower, a human agent of the lender is to sign documents that declare that the borrower’s account was personally reviewed and determined to be in default by that human. By now, I would guess you can tell what I am about to write, and yes, you are correct. These default documents were often robo-signed. These robo-signed default documents may not be valid. Absent a valid Notice of Default and Notice of Trustee’s sale, there cannot be a valid default or trustee’s sale.

Thus, for those people who find themselves facing imminent foreclosure, there may be several more months of “free housing” than originally expected. The banks will eventually correct their mistakes and foreclose, but it may take a while. There is simply too much bank money at stake for them to make true compromises with borrowers.

In closing, I offer a word of caution to anyone about to sue their lender for robo-signing. These lawsuits are complex, time-consuming, and expensive. These lawsuits may delay the sale, but will likely result in loss of the home. There are many so-called mortgage experts out there, including attorneys, who will take money from homeowners and make promises of saving homes based on forgery, procedural violations by MERS, and other such technical matters. Before spending your last dollars on a desperate last ditch attempt to stay in a deeply underwater home (i.e., the amount owed is far greater than the actual market value) that would rent for far less than the mortgage, taxes, insurance, and upkeep, give serious consideration to your situation and get an accurate education about your rights.

Homeowners Need More Advocates

Fransen & Molinaro — Fri, 23 Jul 2010 22:56:00 GMT

A writer by the name of Martin Andelman has a blog called Mandelman Matters. He has written somewhere around three-hundred articles on subjects related to the foreclosure crisis. His analysis is often spot on and his humor is refreshing. The unfortunate and curious thing is that he is virtually alone. Andelman has created a pretty loyal following in a relatively short period of time. A topic with such a significant amount of interest should attract many others who want to engage in the arena of ideas. Instead, homeowners can find a plethora of scathing reviews of attorneys who dare to offer services to struggling homeowners. Certainly some of these reviews are painfully honest and even necessary, but shouldn't there be more Martin Andelman's as well? I would encourage anyone to check out his writings. You can find his blog at http://mandelman.ml-implode.com/. As to the other blogs critical of consumer attorneys, well you should have no problem finding those.

IS NOT PAYING YOUR MORTGAGE WRONG?

Fransen & Molinaro — Wed, 09 Jun 2010 02:21:00 GMT

Many people are talking about strategic defaults. If you don't know what a strategic default is, it's when a homeowner can afford the mortgage but the home's value is so far below the amount owed on the loan that the homeowner decides to walk away rather than pay. The legal and tax implications of a strategic default are left for another discussion. What follows here is a consideration of whether strategic default is "wrong."

I have heard people heatedly argue that when a person takes out a mortgage, he or she has made make a solemn oath to pay back the money, and should pay that money come hell or high water. Aside from being an exaggeration, such a statement is only partly true. Cutting right to the heart of what a mortgage really means, the mortgage is simply an agreement between homeowner and bank that either of two things will occur. This is a very important concept to understand. The mortgage does not only state that a borrower must pay the money back. The mortgage states: (1) If the borrower pays the money back, then the lender will release its lien on the home or (2) If the borrower does not pay the money back, then the lender can take the home.

Reread one and two above and while doing so, keep the two parts completely separated by the word "or." Lenders are professional mortgage players with full understanding of all the risks of loaning money secured by real property. Lenders use expensive Ivy League lawyers to draft their paperwork. Lenders employ experts in theoretical mathematics to create payback schedules. Lenders have Wall Street's sharpest wits mix bad loans with good and create sausage-meat investment funds. Lenders reap huge profits at every step in the lending process from funding loans to selling toxic loan pools to unsuspecting investors or passing them to government (tax-payer) backed securitizers. The average homeowner couldn't trick a lender if his or her life depended on it. Borrowers are basically given take it or leave it choices when it comes to getting mortgages. It is, and has always been, slick and savvy lender versus little ignorant borrower all the way through the process.

With that understanding, and the understanding that the lender fully understands every finely printed term on every page in the loan documents, it is obvious that the lender fully contemplated what it wants to happen when the borrower does not pay. In fact, most of documents in the huge packet of loan documents address what happens when the borrower does not pay as opposed to what happens when he or she pays.

It would be wrong if a lender accepted all the payments required and then kept the lien on property. It would be wrong if a borrower does not pay the mortgage but gets the lien off the property. What is not wrong is when one of the two outcomes contemplated in the loans occurs exactly as contemplated. Neither lender nor borrower breaks a promise when either one of the two contemplated outcomes occurs.

Putting it even more simply, lenders are big boys and know exactly what they are doing. Lenders know the risks of borrowers failing to pay. Lenders know the ups and downs of real estate markets. Lenders know how to pass any losses they suffer onto borrowers and the U.S. government. It is wrong to take advantage of the uninformed. Exercising one of two fully-contemplated options is not wrong.

BANKRUPTCY 2010 – CAN MY BUSINESS BE SAVED?

Fransen & Molinaro — Tue, 11 May 2010 21:40:00 GMT

     Many of us hoped that 2010 would start an economic turnaround that would enable individuals and businesses to keep their heads above water and avoid bankruptcy. While some pockets of the economy show signs of modest improvement, much of Southern California's economic base has not responded well to the "economic stimulus." Many small businesses and self-employed persons, have, or are considering, simply throwing in the towel. Is there an alternative to closing the doors or letting everything go? Absolutely!
    When we hear the word "bankruptcy," the immediate picture that comes to mind is that of a Chapter 7 liquidation which ends the business. If the business has a chance of survival, Chapters 11 or 13 may be the more appropriate way to save the business. When large corporations suffer financial losses, Chapter 11 provides a method of restructuring their debt and allowing them to stay in business. However you don't have to be GM or Pacific Gas & Electric to file Chapter 11. Small businesses, corporations, partnerships, sole proprietorships, and individual professionals may file Chapter 11, remain in business, and avoid liquidation. There are provisions in the law for a "Small Business Chapter 11," to speed the process and make it less costly.
    A Chapter 11 is based on a new business plan that you formulate. Under Chapter 11, the debtor may seek an adjustment of debts by reducing the debt, by extending the time for repayment, or seeking a more comprehensive reorganization. There is no debt limit in a Chapter 11. The only real requirement is that there is some hope of reorganization.
    Chapter 13 is also a debt repayment plan. In contrast to a Chapter 11 plan, the 13 plan is very simple and more structured. Chapter 13 eligibility is limited by a debt ceiling but many small businesses qualify (if not, the small business 11 may be appropriate). Most people think only an individual can file a Chapter 13. While partnerships and corporations cannot file a Chapter 13, sole proprietorships or individual professionals may be eligible for relief under Chapter 13.
    One important advantage of Chapter 13 is that the plan can include a home mortgage and provide individual debtors with an opportunity to save their homes from foreclosure. Chapter 13 plans allow time to "catch up" on past due payments to the 1st mortgagor, and, in some cases, "lien strip" a junior trust deed. A "lien strip" can treat a junior lien on real property as unsecured for purposes of the Chapter 13 plan. In some cases, when the plan is completed and a discharge entered, the junior lien is completely extinguished.
    If reorganization is not possible, Chapter 7 can provide relief and protection for business's owners. To qualify for Chapter 7 relief, the debtor may be an individual, a partnership, or a corporation or other business entity. Under Chapter 7, there is no limit to the amount of debt and no consideration of whether the debtor is solvent or insolvent. In 2005, Congress passed legislation making qualification for Chapter 7 more difficult by requiring the use of a "Means Test" which used gross income as a limiting factor. Fortunately, if your debt is primarily business debt, the income limits may not apply.
    Bankruptcy law in 2010 is more complicated than ever, but with highly skilled counsel guiding the process, you and your business can survive this unprecedented downturn. While successful Chapter 7 and 13 bankruptcies require modest experience, a successful Chapter 11 filing is complicated and is nearly impossible without years of experience. The final message here is that there is help for struggling businesses.

YOU ABSOLUTELY CAN’T DISCHARGE TAXES IN BANKRUPTCY! OR CAN YOU?

Fransen & Molinaro — Tue, 11 May 2010 21:39:00 GMT

    In today's exceptionally hard economic times nearly everyone has thought about bankruptcy, even those with no intention of filing. We all have at least one friend or acquaintance who has filed bankruptcy. Many local businesses as well as quite a few large corporations have filed for bankruptcy protection.
    Most of us are also aware that in 2005 the banks and credit card companies successfully lobbied Congress to make it harder for individuals and small business owners to file bankruptcy (yes, these lobbyists represented the same banks - JP Morgan-Chase, Citibank and corporations like AIG and Goldman-Sachs that brought you this new economic crisis in the first place and the same banks have now been bailed out with corporate welfare money) by limiting the amount of income a person can make and still file for Chapter 7. Most people that come to our law office already understand that domestic support, student loans and governmental fines cannot be discharged in bankruptcy. But, what about tax debt? Are taxes dischargeable? The traditional answer is that tax obligations to the state and federal government cannot be discharged. However, like many things in the law, there are exceptions. Depending on the type of taxes, when they were assessed and certain other factors, the tax debt may be dischargeable. Bankruptcy tax dischargeability analysis is not only hard to say but a very tricky area of law and even some bankruptcy lawyers have difficulty accurately determining whether tax debts can be discharged.
    During times of massive layoffs and corporate downsizing, many newly unemployed people tap into their 401(k), IRA, or similar tax sheltered retirement vehicle. In some cases the taxes are paid (often as much as 30-40%!) at the time of withdrawal, but when they are not paid at that time, the consequences can be devastating. We have seen clients cash out their 401(k) prematurely, not pay the proper taxes at that time, and find themselves owing the government $50,000 to $100,000 in taxes, penalties, and interest. When a tax debt of that magnitude hits someone without a job and depleted savings, there is really no way to pay the tax debt. Some people will go to their graves owing back taxes and penalties to the IRS. The most important keep in mind thing when significant taxes are owed to the IRS or to the State of California is that there may be some relief.
    Some debtors can get tax debt relief through a Chapter 7 bankruptcy. The facts have to be just right for this type of discharge, but it is not impossible. Another really important and powerful weapon against oppressive and overwhelming tax debt is the Chapter 13 bankruptcy plan. In some cases, a person may be able to treat tax debt as general unsecured debt. If this is the case, then only a percentage of the tax debt gets paid, and the balance is discharged. If the taxes are secured (for example by a tax lien) or the taxes are determined to be priority debt (recent taxes for example), there are still ways to reduce the taxes, or at the very least, to pay only the principal amount of the taxes without interest or penalties. The tax arena is filled with laws and loopholes, and this is why both experience and knowledge are necessities when dealing with "back taxes."
    When substantial taxes plus other debts are owed, it is prudent to consult a bankruptcy attorney who clearly understands the tax implications of the Bankruptcy Code.

LOAN MODIFICATION SCAMS

Fransen & Molinaro — Tue, 11 May 2010 21:39:00 GMT

    You don't need to read this Newsletter to learn that, over the last two years, many California homeowners have fallen victim to loan modification scams and foreclosure rescue scams. Predators see opportunity in desperation, and our economy has created many desperate people.
    While most real estate professionals are noble and take pride in helping people with the biggest investment they will ever make, there is that bottom few who give a bad name to the whole industry. Some of these con artists honed their skills during the real estate bubble when they peddled the toxic loans. When the mortgage industry imploded, these and unscrupulous brokers and loan officers found themselves unable to find new jobs at which they could continue to earn tens of thousands of dollars each month. Experienced at high pressure boiler room sales techniques, accustomed to reaping huge commissions, and feeling no remorse for having put people at risk of losing their homes, they turned to the field of mortgage modifications.
    These swindlers advertised themselves as foreclosure prevention experts who use insider knowledge of the mortgage business to reduce loan balances, fix rates, and stop foreclosures. Lured by such false promises, borrowers paid thousands of dollars for help that would never arrive. When a borrower balked at paying thousands of dollars, he or she is told to stop making mortgage payments to free up money to pay the company's fee.
    Many victims tell us the same story. They are told to stop making mortgage payments and not to contact the lender. Meanwhile, the scam company sends the lender letter demanding that the lender no longer contact the borrower but instead direct all future communication to the company.
    Once the lender-borrower connection is severed, the company ceases all contact with the lender. Of course, the customer has no idea that the lender continues to demand payments until the a Notice of Default ("NOD") arrives in the mail. When, the anxious customer then calls the company for status, he or she is told not to worry, because the NOD is just part of the game that lenders play.
    The homeowner finally realizes he or she has been scammed when the Notice of Trustee's Sale ("NTS") arrives. At this point he or she calls the company only to be told that the lender denied the loan modification. The company keeps the money, and the customer loses his or her home.
    In an effort to protect borrowers from the illegal tactics of "loan mod shops," California enacted many draconian prohibitions that chased reputable attorneys and real estate professionals out of the loan modification business. However, the borrower seeking legal advice on loan modification, short sale, or foreclosure should still be able to find many attorneys who will meet for an hour with them. The borrower should be willing to pay for this hour meeting with the attorney, because he or she will get personal legal advice. Not only will the borrower get to meet the attorney face to face, but he or she will be able to determine what additional services, if any, are needed.
    In some cases, the borrower may only need that hour of the attorney's time. In other cases, the borrower may need help drafting letters or further understanding his or her rights as the process of foreclosure or short sale proceeds. The client should not expect the lawyer to tell him or her what to do, but instead present options, walk the client through each option (likely ones that the client did not know existed), and provide enough education for the client to make an informed decision about what to do.
    As for recovery for victims of loan modification scams, the chances are often bleak as the culprits frequently change corporate identities and hide their assets. Consulting an attorney who handles consumer litigation is one place to start. If formal litigation proves to be too costly, then small claims court may a better alternative.

WHEN COUPLES DIVORCE, WHO HAS TO KEEP THE HOUSE?

Fransen & Molinaro — Tue, 11 May 2010 21:38:00 GMT

    The major battles for divorcing couples used to be custody of children and possession of community assets. That was the rule for as long as people remember. However, in today's economy, the only valuables in many marriages are children. Prior to the real estate meltdown, divorcing couples would litigate over ownership of the family home, and such a fight was worth every penny spent, because ownership in real estate was a great investment.
    Such courtroom battles are rarely seen today, because the family home is an economic liability; a hot potato that will likely burn whoever is left holding it. When a home is upside down (that is, worth much less than is owed to the lender), neither spouse wants the house. Each spouse's goal becomes getting off the loan and walking away. The problem is the lenders are not willing to let either spouse off the hook for the debt.
    If a mortgage is barely affordable for both spouses, there is no chance of either spouse qualifying for a loan modification on his or her own. The end result is that neither spouse will get to keep the home. Before spending time and money trying to refinance or modify the mortgage on a family home, divorcing couples should consult with their family lawyers about whether there is any real possibility of keeping the home.
    Out of necessity, many experienced family lawyers have become skilled practitioners of mortgage law and debt law as they guide their clients through loan modification, short sale, foreclosure, and bankruptcy. Though facing life after divorce is extremely stressful in and of itself, facing overwhelming debt at the same time can push one past the breaking point. When starting anew with regard to family and romance, it may be the time to get a fresh financial start. If a family lawyer is uncomfortable with mortgage problems, debt issues, and bankruptcy, that lawyer should work with a lawyer who handles such matters. Filing for Chapter 7 bankruptcy protection has the potential to wipe away unsecured debts such as attorney should be able to determine whether the Chapter 13 plan can be modified to lower the planned payments or converted into a Chapter 7.
    Another reason to specifically seek out legal advice on both bankruptcy and debt issues when considering a divorce is that divorce lawyers are not inexpensive. While lawyer's fees may be well-earned in a case of large assets, a thorough understanding of what assets are worth protecting and knowledge of debt protection will save the time and expense of litigating over "nothing." Legal fees can then be spent on what is important, custody and visitation.
    At Fransen & Molinaro, LLP Marie Gray has been a family lawyer for 19 years and Gregg Eichler has been a bankruptcy attorney for over 30 years. They can work together to provide the fresh start many people need.

CREDIT SCORES – WHY SHOULD YOU CARE?

Fransen & Molinaro — Tue, 11 May 2010 21:37:00 GMT

    For the last decade the media has pounded into the heads of American consumers that having a high credit score is the key to financial success. It should come as no surprise that the funding for all those commercials and PSA's came from lenders, both mortgage companies and credit card providers. Of course lenders want people to pay their debts, and by creating a false pride in the "scores," those debts have a better chance of getting paid.
    When faced with overwhelming debt, a person faces a moral choice about how far to go in trying to pay creditors. Many agree that people should pay their debts, but not if payment means not having food on the table or a roof overhead. Creditors know that many borrowers will default, and the losses are figured into the cost of doing business as a creditor.
    To be sure, scores were very important in the last decade as creditors would lend to anyone with a high score, whether or not that person had the ability to repay. However, to obtain a loan now, the two most important things a borrower must prove are stable income and sufficient assets. Thus, a "good borrower" is someone with a job and assets. The score is no longer the most important qualifying factor.
    Creditors make money by loaning money. If they refuse to loan money to people with jobs and assets just because those people have low scores, they will not be providing many loans. What is important is the reason a score is low. If due to a one-time foreclosure, a lender may be more willing to lend to someone with a job and assets. Likewise, landlords will rent to someone with a job and assets over someone without a job and assets, no matter what the score. Scores are important, but just not that important.