California law specifically addresses foreclosure consultants and restricts their activities; among other things, they are prohibited from collecting upfront fees for their work. However, because attorneys are permitted to accept advance fees, they are in demand by some loan modification businesses. (Licensed brokers also may accept advance fees under certain circumstances.)
According to the alert, posted on the State Bar's home page (calbar.ca.gov), "There is evidence that foreclosure consultants may be attempting to avoid the statutory prohibition on collecting a fee before any services have been rendered by having a lawyer work with them in foreclosure consultations."
The alert goes on to list a series of ethics rules prohibiting lawyers from:
* paying a referral or marketing fee to a foreclosure consultant or other person for referring distressed homeowners to the lawyer;
* directly or indirectly splitting fees earned from a distressed homeowner client with the foreclosure consultant or any other non-lawyer;
* aiding a foreclosure consultant or anyone else in the unauthorized practice of law or forming a partnership or joint venture with a foreclosure consultant or other non-lawyer if any of its activities would involve providing legal services;
* contacting in person or by telephone a distressed homeowner referred by a foreclosure consultant or someone else unless the lawyer has a family or prior professional relationship with the homeowner;
* filing a lawsuit without good cause or motions in a lawsuit that are simply intended to delay or impede a foreclosure sale; and
* failing to perform legal services with competence.
Read the Alert: http://calbar.ca.gov/calbar/pdfs/ethics/Ethics-Alert-Foreclosure.pdf
Read entire article: http://www.calbar.ca.gov/state/calbar/calbar_cbj.jsp?sCategoryPath=/Home/Att orney%20Resources/California%20Bar%20Journal/March2009
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