- April 19, 2024
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I received an email in 2008 from a friend, in South Florida, who had purchased a condominium in Palm Coast during the buying frenzy. I knew he had two mortgages on the condo and had been upside down for months. But his message was upbeat. He was anxious to tell me about the loan modification deal he was getting. He thought I would want to write an article about this new program.
A California-based company had promised that it could eliminate his second mortgage completely and reduce the balance on the first mortgage. The representatives explained that they were in direct contact the banks. They would handle all the legwork. All my friend had to do was send them an advance of $2,500. I hated to take the wind out of his sail, but he was the victim of a new (at the time) type of fraud.
Scores of companies, many operated by the same people who helped home buyers get into mortgages they could not afford, continue to prey upon and victimize vulnerable homeowners. At first, my friend didn’t believe it could be a fraud. They had told him that there were no complaints against them. Finally believing me, he contacted the company and was lucky enough to get most of his money back.
Many states, including Florida, quickly passed legislation prohibiting advance payments. Attorneys general in several states subsequently prosecuted several such companies. But because attorneys often collect advance retainers, they were excluded from the legislation.
The spotlight has shifted to illuminate questionable practices within the legal profession. Several foreclosure-mill law firms commonly created phony documents. The David Stern law firm was forced to close.
A July 25 story in the St. Petersburg Times questioned the practices of two attorneys, one each from Florida and California, who urged homeowners to sign onto a “mass joinder” lawsuit against the big banks. Many of the prospective plaintiffs are current on their mortgage payments but simply upside down. What makes them so vulnerable is that they have probably exhausted their patience talking to their lenders about a loan modification.
The St. Petersburg Times story questioned the ethics of the pair, suggesting commission-based phone solicitations and unapproved direct mailings (cold calls are prohibited by Florida Bar rules). Direct-mail pieces must be approved by the bar. The two attorneys have reportedly signed up several thousand plaintiffs, each paying up to $5,000 each. Do the math. That’s millions of dollars with no success to date.
We should be able to assume that the licensing and regulatory agencies properly vet and oversee the actions of professionals and licensed practitioners, but the widespread existence of fraud tells us otherwise. Trust, but verify.
