On October 21, Parsa Law Group founder James Parsa surrendered his license right to practice law amid a probe into a prior conviction for having sex with a minor, according to the California State Bar.

Parsa, whose firm promised to help homeowners avoid foreclosure, was suspended on Oct. 16  after the bar discovered Parsa pled guilty in 2001 to a misdemeanor charge of sex with a child under 18.  The Bar said Parsa did provide evidence that he was working on homeowner cases. But he never reported his conviction to the Bar.  After bombarding southern california with internet, radio and televsion advertisements, the firm locked out clients and employees just before the passing of SB 94 which banned Attorneys and others from accepting  advance fees from homeowners wanting help negotiating a loan modification.

According to the Orange County Register, The Bar said two other Orange County lawyers have surrendered their right to practice law:

• Ronald Rodis of Rodis Law Group and America's Law Group in Newport Beach, resigned from the Bar on Oct. 13.
• Jeffrey Nemerofsky, U.S. Advocacy Law Group and U.S. Financial Products, in Laguna Niguel, resigned Oct. 16.

The Bar also placed Christopher Diener of Irvine-based Home Relief Services LLC on inactive status on Oct. 9, "due to the State Bar Court judge's finding that he poses a substantial threat of harm to his clients and the public."

The fallout continues.  We are beginning to see the consequences of allowing the boiler room culture of the sub-prime mortgage industry to infect the practice of law.  Clients of Parsa and other former attorneys are encouraged to reach out to our Firm and receive a 10% discount on legal fees for bankruptcy or on a debt relief strategy consultation.  In addition, my staff is available to speak with these victims for free.  There are no short cuts.

On October 21, Parsa Law Group founder James Parsa surrendered his license right to practice law amid a probe into a prior conviction for having sex with a minor, according to the California State Bar as reported in today's Orange County Register.

Parsa, whose firm promised to help homeowners avoid foreclosure, was suspended on Oct. 16  after the bar discovered Parsa pled guilty in 2001 to a misdemeanor charge of sex with a child under 18.  The Bar said Parsa did provide evidence that he was working on homeowner cases, but he never reported his conviction to the Bar.  After bombarding southern California with internet, radio and television advertisements, the firm locked out clients and employees just before the passing of SB 94 which banned Attorneys and others from accepting  advance fees on loan modification services. 

According to the Orange County Register, The Bar said two other Orange County lawyers have surrendered their right to practice law:

• Ronald Rodis of Rodis Law Group and America's Law Group in Newport Beach, resigned from the Bar on Oct. 13.
• Jeffrey Nemerofsky, U.S. Advocacy Law Group and U.S. Financial Products, in Laguna Niguel, resigned Oct. 16.

The Bar also placed Christopher Diener of Irvine-based Home Relief Services LLC on inactive status on Oct. 9, "due to the State Bar Court judge's finding that he poses a substantial threat of harm to his clients and the public."

The fallout continues.  We are continue to witness the consequences of allowing the boiler room culture of the sub-prime mortgage industry to infect the practice of law.  Clients of Parsa and other former attorneys are encouraged to reach out to the Law Office of J. Arthur Roberts and receive a 10% discount on legal fees for bankruptcy or on a debt relief strategy consultation.  In addition, my staff is available to speak with these victims for free.  There are no short cuts.  The practice law is hard work that requires a hands on approach by lawyers, staff and clients.

Source:  http://mortgage.freedomblogging.com/2009/10/27/loan-aid-lawyer-surrenders-license-after-sex-with-minor/20301/

Since the introduction of the Obama HAMP program, Banks and loan servicers have modified loans primarily by reducing interest rates or extending the term of the mortgage. These methods may temporarily help borrowers struggling to make payments without requiring lenders to lower the principal owed. By avoiding principal reduction, the bank's don't have to recognize immediate losses on their books, profits are improved, book value assets remain inflated and stock prices can continue to climb.  Its smoke and mirrors accounting that ignores the true financial health of the banks and allows for fat bonuses for executives and improved value for the shareholder.  Based on 2nd quarter 2009 data, the government claims that in a small but growing number of cases, banks are going further and writing off some of the loan altogether.

The Obama administration, has made saving homeowners from foreclosure a cornerstone of its economic-rescue strategy. The Obama plan aimed at helping as many as nine million households struggling with mortgage debt through loan modifications or refinancings. The plans include financial incentives for mortgage-servicing firms that modify loans.  Unfortunately, the bankruptcy loan modification provision, which would have given judges the power to reduce principal on residences, died in the U.S. Senate a few months ago. 

The lobbying strength of the mortgage industry prevented passage of this much needed change in the law. Currently, judges can reduce principal loan balances on all over encumbered assets in bankruptcy, EXCEPT primary residences, thanks to a 1977 amendment pushed through by the mortgage industry.  The BK court system and procedures are already in place to handle judicial loan modification.  It turns out that, even in a crisis, the receipt of campaign contributions remains a powerful incentive for our representatives.  Broke people can't afford lobbyists.  Homeowners in financial distress cannot match the historically documented campaign contributions offered to many of our public representatives by the mortgage industry.

Ironically, banks may now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital. A look at the stock market reveals that banks are doing fairly well.  Billion dollar executive bonuses are flowing again as a result of the infusion of billions of tax payer welfare subsidies.  Banks can afford "to take the pain up front," said Kevin Fitzsimmons an analyst at Sandler O'Neill & Partners LP in New York. "If they want a legitimate chance of salvaging something out of the loans, they are better off taking the loss now."  But will they...really?

The portion of loan modifications in the second quarter that involved reducing the principal jumped to 10% from 3.1% in the first quarter, according to the report released Wednesday by the Office of the Comptroller of the Currency, or OCC, which regulates national banks.  Big deal!  Consider that last year, banks were very rarely giving any loan modifications.  From this bankruptcy attorney's perspective, the loan mod industry didn't exist until less than 2 years ago.  Before 2008, it was known as the subprime mortgage industry.  With all due respect, the tripling of the number of principle reductions, in contrast to the government hype, indicates a failing economic-rescue strategy.  The fox is still watching the chickens and California law dogs have been muzzled by SB94.  Without BK reform or a private cause of action against loan servicers for lack of compliance with HAMP guidelines, we will not soon solve the growing problem facing home owners in financial distress.  

Look at the actual numbers:  The government plan targets 9 million homeowners in financial distress.  Realistically that number should be doubled as it fails to account for the borrowers who are current on loan payments, but who are considering walking away from properties that hundreds of thousands of dollars underwater, especially in the case of high debt Califonia.  The OCC report tallied 439,574 agreements offered to help troubled borrowers, including loan modifications and other repayment plans, in the second quarter. That was up only 75% from a year earlier when loan mods were rarely offered, just impossible repayment plans. But of this year's Q2 total, only 142,362 of the agreements were classified as loan modifications.  Consider that these HAMP loan mods are themselves time bombs akin to variable rate mortgages.  Based on today's rates, a HAMP loan mod can add up to 3.5% to the interest rate from year 6 to 10.   

Notwithstanding the problems borrowers may face down the road, these loan mods are often insufficient to help borrowers today.  Of loans modified in this year's first quarter, 28% were in default again within three months, the OCC said. Among those modified in last year's second quarter, 56% were in default again a year later.  More and more California borrowers are asking the question:  Even with a 5 year break in interest rate and payment, do I really want to own a home that is worth half of what I owe?  Even for current borrowers, the answer is increasingly, No way!  Many banks are ok with this, BankOne West gets a subsidy from the government to ofset its losses on foreclosed homes in addtion to an insurance pay out.  Foreclosures can be money makers for banks and servicers.

The real numbers on principal reduction are dismal.  Of the 142,362 loan mods executed, only 10% of those involved reducing the principal.  Think about it:  out of perhaps 18 million homeowners in financial distress, less than 15,000 principal reductions were offered lat quarter?  But there is another twist:  From an anecdotal standpoint, having touched about 200 loan mods in the last year, we have seen ONE principal reduction offered on a first mortgage.  The loan was serviced by Wachovia.  In contrast, we have seen about 20 principal reductions offered on second mortgages.  The sampling of my cases supports the notion that the vast majority, perhaps 95%, of the 15,000 principal reduction loan modifications are on second mortgages.

Why does this matter?  Understand that a second mortgage that is completely underwater gets nothing after a foreclosure, and maybe a few cents on the dollar on a short sale.  Furthermore, an underwater junior lien can be VOIDED and stripped off title in a Chapter 13 bankruptcy even under existing law.  Reducing principal on second mortgages barely helps the borrower and the bank's cooperation isn't need anyway.  If 95% of the 15,000 loan mods are merely second mortgage principal reductions, where is the real incremental value to the borrower?  Does this mean that less then 800 principal reduction loan mods were offered on first mortgages in the second quarter of 2009?  It seems so. 

The data represented in the government report is truly a drop in the bucket compared to the 18 million homeowners potentially in financial distress.  In my opinion, banks will never offer first mortgage principal reductions in such a significant number so as to stop the coming wave of property foreclosures.  Asset managers and real estate agents are lining up for the coming gravy train, too.  Banks must be forced to do so by changing the bankruptcy law back so as to allow judicial loan modification.  This will keep families and communities intact. 

Unfortunately, there is too much money to be made by lenders in coming wave of foreclosures  Offering principal reduction and recognizing the true losses that have occurred in the value of the collateral would kill current bank profits and eliminate billion dollar executive bonuses.  People need real help, I'm starting to wonder who our federal govermnent truly represents?

 

COMMENTARY ADDED, SOURCE:  http://online.wsj.com/article/SB125431960273352535.html 

 

Foreclosure filings were reported on 937,840 properties last quarter.  According to RealtyTrac, foreclosures in the 3rd quarter of this year increased almost 23% from last year and are expected to accelerate in 2010.  The national numbers hide the severity of the problem out west, especially in California.  Nearly 25% of all foreclosures occur in California.  California, Florida, Arizona, Nevada, Illinois and Michigan accounted for 62% of the nation's foreclosure activity in the third quarter, according to RealtyTrac.

The wave is said to be driven by rising unemployment and more adjustable-rate loans resetting to higher monthly payments. Ya think?

This is no surprise from our view on Main Street.  The crisis has been moving up the food chain over 2009.  More and more middle and upper middle class are contacting our office looking your legal and financial solutions.  For some, the simplicity of filing Chapter 7 is not an available remedy.  The changes to the bankruptcy code, paid for by creditors and contained within the  2005 reform act means that a 5 year Chapter 13 plan is the only BK option.

That there is more to come is no surprise...but there is more to it then unemployment and rate adjustments.  It is well known that many lenders imposed a foreclosure moratorium and have attempted to control the REO inventory so as to keep prices artificially high.  Some clients have remained in homes, or have collected rents on second homes, for over a year without paying a dime.  Many of the moratoriums have been lifted and some banks are moving to re-start the foreclosure process.  Lenders like the former Indy Mac, now Bank One West are especially aggressive about sales as of late and are refusing postponements.  Bank One West has a new financial incentive to foreclose.  Pursuant to a sweetheart deal with the government, tax payers have to share in the foreclosure losses on Bank One West's for a set period of time.  The losses are also insured so that Bank One West will actually make money on the eventual REO sales of these homes.

For consumers, this would be a great time for our representatives in government to revisit judicial loan modification in Congress.  Changing the bankruptcy laws to restore residential cram down would keep families and communities intact rather than create a profit opportunity for the financial community that created the framework to allow this crisis to occur.  This is unlikely, as the financial industry seems to have substantial influence on our representatives on both the state and national level.  Case in point: the recent passing of SB 94 which effectively hampers a borrower's ability to retain competent legal counsel to pursue a loan modification was sponsored by legislature's who receive substantial campaign contributions.  Money talks.  So much for the government being "for the people".

At this point, any homeowner in financial distress has heard of,  or retained the Parsa Law Group.  The firm has spent hundreds of thousands of dollars advertising loan modification services on the internet, TV and radio.  The firm has over a hundred employs and occupies two floors in the DITEC building in Costa Mesa.  Most recently, the firm has been attempting to expand its services to include bankruptcy, although case records indicate that Mr. Parsa is not an experienced bankruptcy attorney.  

Last week, clients of Parsa found that the offices were closed.  Most employees have been laid off.  Hundreds of clients have been left without representation and are out thousands of dollars each.  Local police had to be called to the law office to calm upset clients.  To date, we have been contacted by a handful of Parsa clients and we remain available to those clients if they need a law firm to help clean up the mess.

The passing of SB 94 restricting advance fee loan modification combined with the recent suspension of Mr. Parsa from the practice of law are contributing factors to the fall of this organization.  Parsa was convicted of having sex with a minor resulting in the suspension from the practice of law.  According to California State Bar records:

In the Matter of JAMES MAZI PARSA
a Member of the State Bar of California
Since respondent James Mazi Parsa, State Bar Number 153389, has been convicted of violating Penal Code section 261.5, a misdemeanor involving moral turpitude, under the authority of rule 9.10(a), California Rules of Court, it is ordered pursuant to Business and Professions Code section 6102 that respondent be suspended from the practice of law effective October 16, 2009, pending final disposition of this proceeding. It is also ordered that respondent comply with rule 9.20, California Rules of Court, and perform the acts specified in subdivisions (a) and (c) of that rule within 30 and 40 days, respectively, after the effective date of this suspension.

As the judgment of conviction is final and it appearing that the statutory criteria for summary disbarment are not met, this case is referred to the hearing department for a hearing and decision recommending the discipline to be imposed.
Source:  http://members.calbar.ca.gov/courtDocs/09-C-12545-1.pdf

Unfortunately for homeowners in financial distress, the timing could not be worse.  Hundreds of pre-paid clients in need of immediate legal service have been left without representation.  For those consumers the loss of legal fees is the least of the concerns.  Many have loan modifications in the works or need immediate bankruptcy relief to protect homes and assets. 

I encourage the former clients of the Parsa Law Group, or any other loan modification shop, to contact my office if they need help.

Effective October 11, 2009, California Senate Bill SB 94 became law. The law imposes new restrictions on lawyers, real estate agents and others who offer loan modification and forbearance services.  See http://leginfo.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_bill_20091011_chaptered.pdf.

The new law will change how attorneys will perform loan modification services and will likely eliminate the willingness of attorneys to accept these cases.  Most lawyers will not risk the chance of not getting paid after providing months of loan modification services.  This will leave borrowers at the mercy of the lenders whose primary concern is profit and the wealth of shareholders.  California Civil Code 2944.7 reads as follows:

perform a mortgage loanmodification or other form of mortgage

offense punishable by a fine not exceeding ten thousand dollars

exceed one year, or by both that fine and imprisonment, or if by

a business entity, the violation is punishable by a fine not exceeding

fifty thousand dollars ($50,000). These penalties are cumulative