Generally, investigations of California attorneys under investigation for misconduct are confidential until charges are formally brought against the lawyer.  In an attempt to protect the public from potentially getting scammed or ripped off, the State Bar Interim Chief Trial Counsel Russell Weiner released the names of 16 California Loan modification attorneys under investigation for misconduct.  "It appears these attorneys may have significantly harmed their clients who were already facing great financial pressure and the possible loss of their homes." 

Those attorneys being named by the State Bar have allegedly have taken fees for promised services and then failed to perform those services, communicate with their clients or return the unearned fees.  Many of the offending attorneys are associated with firms that use telemarketers or phone banks to sign up clients without regard to the facts of the individual case or whether or not the client can be helped.  In many cases, the attorneys work with untrained non-attorney staff engaging in the unlawful practice of law by offering legal advice to prospective clients.

According to Weiner, "Consumers should not be comforted by advertisements that claim the attorney is a member of the State Bar of California...such membership does not mean the attorney has any special knowledge, experience or expertise in the area of loan modification. In fact, it appears that many of the attorneys offering these services have little or no prior experience in the area of loan modification."

The following attorneys have received a significant number of complaints related to the loan modification services they were hired to perform. They are entitled to a full and fair hearing on any charges that may be filed in the future. No discipline may be imposed unless and until the State Bar proves allegations of misconduct by clear and convincing evidence.

• David Arase, Bar No. 233705, Costa Mesa, Arase Law Firm and National Housing Assistance
• Stephen Burns, Bar No. 113371, Los Angeles, Legal Group Network
• Robert Buscho, Bar No. 122556, Fullerton, United Law Group
• Nicholas Chavarela, Bar No. 251632, Santa Ana, Rodis Law Group and America's Law Group
• Steven Feldman, Bar No. 103676, Mission Viejo, Feldman Law Center
• Eric Johnson, Bar No. 224065, Culver City, Avantgarde Group
• Paul Lucas, Bar No. 163076, Aliso Viejo, Lucas Law Center
• Brandon Moreno, Bar No. 233750, Santa Ana, U.S. Foreclosure Relief Corp.
• Jeffrey Nemerofsky, Bar No. 213014, Laguna Niguel, U.S. Advocacy Law Group and U.S. Financial Products
• Gregory Paiva, Bar No. 207218,Ontario, Law Offices of Gregory Paiva
• Adrian Pomery, Bar No. 249664, Orange, U.S. Foreclosure Relief Corp.
• Ronald Rodis, Bar No. 181873, Newport Beach, Rodis Law Group and America's Law Group
• Mark Shoemaker, Bar No. 134828, Long Beach, Advocates for Fair Lending
• Marc Tow, Bar No. 78429, Newport Beach, Marc Tow and Associates
• Michael Yellin, Bar No. 255050, Los Angeles, A Fresh Start Loan Modification
• Sean Rutledge, Bar No. 255938, Irvine, United Law Group

The State Bar suggests that consumers be wary of attorneys offering loan modification services under any of the following circumstances:

• Advertisements of the office do not expressly identify by name the attorney who is responsible for the business.
• Office staff will not readily identify by name the attorney responsible for oversight of the business.
• The attorney in charge of the office is too busy or not willing to meet personally with prospective clients.
• The firm advises a consumer to stop paying the existing mortgage.
• The business, through its advertisements or claims of its representatives, makes  claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved. 
• The business demands payment of a large fee, even before obtaining a prospective client's basic income and expense information, and information about the existing mortgage and present home value.
• The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.

The loan modification industry grew directly out of the sub-prime mortgage culture that drove the real estate economy over the last 10 years.  The same boiler room culture began infecting the legal industry 24 months ago as mortgage professionals searched for a replacement of the income that was lost when at the end of the sub-prime boom.  Soon after, local mortgage professionals recognized loan mod as an opportunity to keep the gravy train rolling by utilizing the same employees, skill sets and infrastructure needed to extract fees from homeowners.

The mortgage "professionals" recognized that they needed a law license or an attorney affiliation to continue to accept advanced fees from consumers.  Without advanced fees, the business model would collapse.  The hunt began for attorneys willing to associate with the broker shops. Last fall, my office was receiving 5-10 inquiries a week from broker shops pitching some type of "affiliation", "partnership", or "attorney-backed" arrangement.  The brokers simply did not understand the ethical restrictions placed on attorneys.  The focus of the culture was profit at all costs.  For some attorneys, the temptation of making a lot of easy money was too great and they succumbed to the big money offers of the broker shops.  Only now has the State Bar, the Attorney General and the public caught up to what has been going on for a solid two years.

As a bankruptcy attorney and real estate broker with 18 years experience, I've learned that the only way to properly serve a homeowner in financial distress is to roll up your sleeves and delve into the facts on a case by case basis.  An individual game plan must be devised to fit the facts and the realistic goals of the client.  All options need to be addressed including direct loan mod, loan audits, litigation, Chapter 7, Chapter 13, Chapter 11, and short sales.  The practice of insolvency law is a slow grind not akin to the sub-prime mortgage industry or its culture.  It is best practiced one client at a time by a hands-on attorney and a well trained and supervised staff.

Source:  http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395

Loan modification is one tool that a legitimate debt relief attorney can use to assist homeowners in financial distress.  However, the loan mod industry has attracted scammers and rip-off artists.  From mortgage brokers, to unlicensed mod shops to unethical attorneys, the scammers have ripped off the public and caused a backlash against the entire loan modification industry.  Only now is the government beginning to police the rip-off artists.  However, in response to pressure from lenders and loan servicers, the California Senate has passed a bill preventing even legitimate bankruptcy attorneys from accepting advance fee retainers for loan modification cases.  By preventing attorneys from accepting a retainer in advance of a successful resolution, the State of California will effectively prevent homeowners from hiring a lawyer, as few attorneys will offer to represent such clients under such a restriction. This bill goes way to far and will encourage lenders and servicers to continue abusing borrowers.

Once again the banks are having their way with our government.  The lending industry seeks to eliminate the risk, threat and cost of lawsuits from attorneys.  The lenders seek to drive attorneys from the industry through this law.  Given the history of abuses in the lending industry, the banks don't want consumers to have access to attorneys. 

Now more then ever, people need access to legal counsel.  Furthermore, homeowners at risk of foreclosure have a right to legal representation.  The precedent being set by this bill is a dangerous one. It sends the message that attorneys cannot be trusted. That attorneys, if not restricted by statute, would defraud a homeowner in distress. To malign the entire legal profession because of the actions of a handful of unethical attorneys is both wrong and dangerous. People need to trust attorneys and this will establish that even the State Bar doesn't trust lawyers.  The State Bar should do its job and prosecute the rogue attorneys rather then support this overly broad, lender friendly legislation.

Below is a petition that is being circulated to attorneys asking that the State Bar reconsider its support of this bill:

Please Sign This Petition to Compel an Emergency Meeting of the California Bar Association
In Order to Reconsider Its Position on Senate Bill 94 and Assembly Bill 764

The California Bar Association is supporting legislation that will make it illegal for licensed attorneys in California to require clients seeking legal representation related to obtaining loan modifications from their lenders or servicers to pay an upfront retainer. Attorneys who represent these clients who are seeking to avoid foreclosure would be prohibited from billing clients until after a successful resolution.

Obtaining a loan modification for a client requires an indeterminable amount of an attorney's time. While some clients may receive a modification agreement in a couple of months, others take six or even nine months before obtaining agreement from their lenders or servicers, while others require bankruptcy filings, short sale agreements, or other arrangements that avoid foreclosure. The evidence of lender and servicer misconduct and noncompliance with the administration's program is now abundant, and it is clear that homeowners require legal representation if they are to protect their rights and achieve a desired outcome.

Homeowners at risk of foreclosure have a right to legal representation. By preventing attorneys from accepting a retainer in advance of a successful resolution, the State of California will effectively prevent homeowners from hiring a lawyer, as few attorneys will offer to represent such clients under such a restriction. The result will be more foreclosures, causing further harm to the housing market in California.

Lenders and servicers have lobbied to suppress the involvement of attorneys assisting homeowners with negotiations that might keep them in their homes since the housing crisis began. The same interests have lobbied successfully to prevent judges from being able to modify first mortgages in bankruptcy. It is crucial that California's attorneys stand for the rights of homeowners to retain legal counsel, and yet the California Bar is supporting the legislation that would effectively stop attorneys from representing these clients.

The Bar's position is that many California attorneys have acted improperly in their representation of clients related to loan modifications, but the fact is that enforcement of existing statutes would address this issue, and thus far, the number of offending attorneys is quite small as compared with the number of homeowners who have obtained representation and successful outcomes. And with the number of foreclosures certain to rise over at least the next two years, the need for legal representation is certain to increase.

The precedent being set by this legislation is a dangerous one. For one thing, it sends the very clear message that attorneys... all attorneys... cannot be trusted. That attorneys, if not restricted by statute, are the kind of people that would defraud a homeowner in distress. To malign the entire legal profession in this way because of the actions of a small number of unethical attorneys is both wrong and dangerous. People need to trust attorneys and this will establish that even the State Bar doesn't trust lawyers as a whole.

Further, if the legislature is allowed to affect attorney compensation practices in this instance, what will they attempt to limit next? Homeowners have the right to representation before losing their homes to foreclosure. Attorneys have the right to charge for services in such a way that they are assured payment. The California Bar needs to examine this issue in greater depth and hear from attorneys involved in this area of the law before committing to a path that harms consumers, the legal profession, and our economy.

The Bar formulated its position at the beginning of July, and has been unwilling to change its position to-date. However, new evidence of servicer misconduct and insight into the cause of the complaints being submitted to the Bar should have an impact on that position.

We need 500 attorney signatures on this petition to compel an Emergency Meeting of the California Bar Association in order to present all of the facts. Please join us today and sign this petition... there is no time to spare. The legislature is close to bringing the SB 94 and AB 764 legislation to a vote and with the Bar's support, it is likely to pass.

Enforce the existing law. Punish those in violation of that law. But don't impose irrational limits on legitimate attorneys that will prevent homeowners from obtaining legal representation, leaving them on their own when negotiating with their financial institutions.

Please sign this petition asking the California Bar Association to hold an emergency meeting to more fully consider their support for SB 94 and AB 764, the bills that will prohibit attorneys from accepting retainers when representing clients seeking loan modifications.