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Q: Should I hire a loan modification attorney to help me?

Question: Should I hire a loan modification attorney to help me?

Answer: In my opinion, while hiring an attorney who specializes in loan modifications can help you organize the documents you need to submit to your lender, they cannot guarantee you will be approved for a trial loan modification and/or subsequent permanent loan modification.

So you may just end up paying a large amount of money to retain an attorney to help you with the process, in states that allow attorneys to collect upfront fees, not get the desired results and be out a lot of money.

My recommendation is to save your money and do it yourself. You can get assistance to walk you through the process that is free or low cost in the form of:

  • Federal government programs like HUD certified counseling agencies
  • Nonprofit organizations like NACA
  • Neighborhood groups in your area like Legal Aid of North Carolina
  • Using the strategies taught in the loan modification workbook I recommend in The Tools Section.

    The author and loan modification expert, Mike Rockwood, was able to modify five of his own loans, which included rental property. So he knows what he’s talking about in his workbook and knows how to overcome the BS the lenders are using to stall the approval process and flat out deny you.

Dissatisfaction using loan modification attorneys a growing trend

A recent expose in the Chicago Tribune reveals that some lawyers are just profiteers playing off the fears of homeowners facing foreclosure.

A loophole in state and federal laws has made it easy for some attorneys to take advantage of Illinois residents struggling to keep their homes.

In Illinois attorneys are among the few professionals who can legally charge upfront fees to help homeowners modify their mortgages. But instead of negotiating with a lender, some attorneys or the companies they work for just keep the cash and don’t complete the job. Homeowners are often unaware until it’s too late and their homes are in or near foreclosure.

In 2006 Illinois passed legislation that banned charging upfront fees for loan modifications.

But the law doesn’t apply to attorneys. They were exempt because they hadn’t been linked to loan modification schemes and they routinely accept upfront fees to handle bankruptcy cases and foreclosures.

As a result, some mortgage rescue firms are circumventing the law by recruiting attorneys to collect upfront fees from consumers. Attorneys have also set up their own shops. They’re all capitalizing on the huge number of people looking for help as nearly one in 10 Illinois home mortgage loans were delinquent last month.

Lawyers are linked to 30 percent of mortgage foreclosure companies that consumers have filed complaints about to the state attorney general’s office, records show.

But the attorney general’s office said it cannot regulate the practice of law. Although the agency has sued 34 companies and individuals over loan modification schemes, it cannot go after lawyers unless obvious fraud has been committed.

The Attorney Registration and Disciplinary Commission, which regulates lawyers’ conduct, said complaints about loan modification scams have started rolling in.

“We’re not talking about one complaint, we’re talking about dozens and dozens and dozens of matters in our system,” said James Grogan, deputy administrator for the commission.

The Illinois Department of Financial and Professional Regulation also receives complaints about attorneys involved in loan modifications because some have what is known as a loan originator license. Complaints are not disclosed unless there is disciplinary action. The agency said it received 28 complaints in the past year but disciplined no one.

In letters to the Federal Trade Commission requesting a federal rule on the issue, the Illinois attorney general’s office said attorneys’ involvement with loan modification schemes has strained state bar commissions.

“Traditional attorney regulatory bodies are not designed or equipped to deal with the magnitude and scope of fraud involved in the mortgage rescue consulting industry,” Attorney General Lisa Madigan wrote last year.

Madigan’s office and national housing and advocacy organizations argue that attorneys are using their professional license and exceptions in the law to charge premium prices for services that consumers can get for free.

“Unfortunately, there are too many situations where attorneys have accepted funds and not really delivered on the retainer they accepted,” said David Berenbaum, chief program officer of the National Community Reinvestment Coalition.

Attempts to modify loans are often unsuccessful but attorneys still keep fees

Dennis Bordyn, a real estate attorney in Downers Grove, said attempts to modify loans are often unsuccessful, but that doesn’t mean an attorney didn’t do his or her job. It’s not uncommon for lawyers to charge upfront fees, or retainers, for services, and attorneys are usually paid even if their client doesn’t get the desired outcome.

But Bordyn said it is against an attorney’s professional code of conduct to share fees with non-lawyers or allow non-lawyers to do legal work. He said has been approached several times by loan modification companies that want clients and say they will handle most of the work.

“A majority of those companies are frauds,” he said.

When authorities go after companies, however, the attorneys involved are not always held responsible.

The Illinois attorney general’s office in November sued Loan Mod One, which was working with Skokie attorney Mierswa, alleging consumer fraud and deceptive business practices.

The firm advertised that it “guarantees in writing that we will find a solution to stop your foreclosure and save your home or your money back,” according to the complaint filed in civil court.

Like Vega, consumers wrote checks up front that were made payable to Mierswa, according to the complaint. Mierswa and the company were supposed to renegotiate the terms of consumers’ mortgages, but the work was never done, the complaint alleges.

The case is pending, but Mierswa is not named as a defendant.

California State Bar overwhelmed with complaints from consumers

The problem has already overwhelmed the State Bar of California, which set up a task force a year and a half ago to deal with thousands of complaints about lawyers performing loan modifications. Attorneys have resigned and been disbarred after they collected cash and failed to do loan modification work, said Suzan Anderson, supervising trial council for the state bar.

The California legislature also passed a law in October that bars anyone, including attorneys, from collecting upfront fees for loan modifications.

Consumers bombarded with ads from loan modification attorneys

Despite the free assistance available, homeowners are still bombarded with radio ads and fliers offering loan modification services from attorneys who say they can negotiate with a bank when no one else can. The advertisements often target ethnic neighborhoods and promise to save people’s homes.

Blanca Balderas answered one of these fliers in the summer of 2009 after she lost her job in a Greek bakery and couldn’t afford her $1,500-a-month mortgage payments.

The flier advertised a federal program and said Balderas had been “selected” and “pre-qualified” to receive help with overdue payments. It had the name of Chicago attorney Dan Papajcik at the bottom, but the phone number routed Balderas to a company in Florida.

Balderas, who mainly speaks Spanish, said she paid $2,000 with the understanding that she’d be represented by Papajcik. She said she provided financial information and documents to the company, but didn’t hear back for a few months. When she called the company, the phone was disconnected, she said.

The FTC has sued the company, Crowder Law Group, alleging unfair and deceptive practices.

Jon Kessler, an FTC attorney handling the case, said the company had misrepresented itself as a federal government agency and was paying attorneys in local markets $100 to sign up clients after looking over a one-page financial document.

Papajcik said he was working with the Florida company at one point but didn’t authorize that particular flier; he says his signature on the flier was forged. He said his firm spent 13 hours on Balderas’ case and, in the end, the bank decided not to approve her loan modification.

He said he tried to contact Balderas multiple times to offer other help but never heard back from her. He provided the Tribune with a letter he said he sent, but Balderas said she did not receive it.

Before completing and sending in a loan modification package, you may want to obtain some coaching to combat the stall tactics banks/servicers are using to cut to the front of the line of other applications and get approved faster

Click here to get proven help with your home loan modification

Homeowners – Need Some Sound Advice?

Get Out of Debt Workbook
Seasoned debt expert shares several little known but highly effective techniques guaranteed to get you out of debt fast – no matter how much you currently owe.
Stop Foreclosure
Get more help on fighting to stop a foreclosure. A little-known government program will stop a foreclosure in less than a day without an expensive attorney. Ideal for you if you have been rejected for a loan mod, in a trial loan modification or unemployed to buy valuable time.

Legally Restore Your Credit
If you are visiting this blog, you likely have mortgage lates, which are a big blemish on your credit report. Once you resolve your mortgage situation, you can legally remove those mortgage lates and all derogatory credit from your report without having to hire an expensive attorney or credit repair service.

Technorati Tags: loan modification attorney, loan modification lawyer, loan modification

Related posts:

  1. Florida attorney general files lawsuit against three companies for loan modification scam
  2. North Carolina loan modification company shut down by Attorney General
  3. Four state attorney generals offices file lawsuits against 21st Century Legal Services
  4. Ohio attorney general files suit against HomeEq Servicing
  5. Loan modification company seems to have influenced the Nevada state congress to protect industry and not the consumer

Tags: Crowder Law Group, Dan Papajcik, , loan modification attorney, loan modification lawyer

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One Response to Q: Should I hire a loan modification attorney to help me?

  1. FTC Lawyer on 10/03/2011 at 20:21

    Honestly, I agree on what you are saying about your post.

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