Florida Bar ramps up foreclosure-related activities

By Gary Blankenship
Senior Editor

As Florida courts struggle with a mountain of foreclosure filings and a flood of delays caused by the banking industry’s paperwork difficulties, The Florida Bar has stepped up efforts to prevent mortgage-related fraud and to discipline attorneys who may be contributing to the foreclosure mess.

The Bar also has increased its cooperation with the Florida Attorney General in that office’s efforts to combat foreclosure fraud. In addition, the Bar has made more resources available to lawyers and the public about foreclosure issues.

As part of its enforcement effort, Bar President Mayanne Downs has written every chief circuit judge in the state asking for help.

Downs requested that the Bar be copied with any judicial order that finds any Bar members have not acted according to the Rules Regulating The Florida Bar.

“[T]here has been intense media coverage concerning allegations of fraud in foreclosure cases, including references to circuit court orders that have found misrepresentations in filings by lawyers,” Downs said in her letter. “Both The Florida Bar and our courts have a mutual interest in these serious allegations, however we haven’t received many complaints about this misconduct from the judiciary. . . .

“We are asking you to request your judges to copy The Florida Bar with any order that finds members of The Florida Bar have conducted themselves contrary to the Rules Regulating The Florida Bar. I can assure you that we will act on these matters pursuant to our rules and discipline procedures.”

In a separate October 19 letter to Attorney General Bill McCollum, Downs noted that the Bar has been part of the AG’s Mortgage Fraud Inter-Agency Task Force, which looked at fraudulent mortgages and deceptive mortgage modifications schemes, for the past 18 months.

The Bar also has met with AG officials looking into possible misconduct by lawyers related to mortgage issues.

“Continued cooperation between our organizations can only benefit the public and restore confidence in the integrity of our legal system. Please advise me on how we can supplement these efforts and be of greater assistance,” Downs wrote.

The Bar has been involved in the housing crisis through investigations related to fraud in obtaining mortgages and in scams (involving both lawyers and nonlawyers) attempting to victimize those facing foreclosure by falsely offering help in modifying loans.

More recently, the Bar has opened investigations following complaints that lawyers have been involved in reported cases of forged documents, false affidavits, forged notarized signatures, and other shortcuts taken as part of the ongoing tidal wave of foreclosures clogging courtrooms.

The Bar had already established “mortgage fraud,” “loan modification,” and “advertising loan modification” as separate categories of potential rules violations. It recently added “foreclosure fraud” to that list.

As of early November, the Bar had 43 pending cases involving 32 attorneys in that new category.

As of last summer, the Bar had 142 cases pending against 42 lawyers involving loan modifications, and 13 pending cases against 13 lawyers for loan modification advertisements. In the prior year, the Bar had closed 85 cases involving 72 lawyers without discipline, while 32 cases had been closed that resulted in discipline for four lawyers.

About 12 percent of the cases involving loan modification advertisements resulted in discipline, and 27 percent of those involving loan modifications resulted in discipline.

On mortgage fraud, the Bar had 19 pending cases against 18 lawyers as of last summer. In the prior year, the Bar closed 37 cases involving 32 lawyers without discipline, while another 40 cases involving 29 lawyers resulted in discipline, including 15 disbarments. Overall, 52 percent of the cases the Bar had investigated related to mortgage fraud have resulted in discipline.

Bar Ethics Counsel Elizabeth Tarbert said the Bar’s Ethics Hotline has received more than 300 foreclosure-related calls from attorneys since July 1. For the 2009-10 fiscal year, the hotline got about 880 foreclosure-related calls.

The hotline is among several services the Bar is providing both for lawyers and the public.

Of particular interest to attorneys, the Bar will soon offer a free online CLE course on foreclosure filing in Florida, said Terry Hill, director of the Bar’s Programs Division.

Hill said the three-and-a-half to four hours online/downloadable program will be heavily focused on the plaintiff side to provide training and education to those representing lenders, who are actually filing foreclosure cases.

Some of the training topics being considered include emphasizing the specifics of the summary judgment rule; mandatory mediation; the importance of filing defaults; what is necessary for a legitimate affidavit of diligent search; when a lost note count is legitimate; the business records exception to the hearsay rule; the role of paralegals; when bonds are necessary; a review of the holders in due course/negotiable instruments law; and service of process do’s and don’ts.

Hill anticipates rolling out the free online program in December.

Twelfth Circuit Chief Judge Lee Haworth also has suggested the Bar look into the possibility of developing a foreclosure training “boot camp” for poorly performing plaintiff lawyers.

“Judges could use it as a sanction when we have repeat noncompliance,” Haworth said.

The Florida Bar Consumer Protection Law Committee has made extensive resources available on the homepage of the Bar’s website for both consumers and attorneys, including:

• Schedules of housing help/foreclosure workshops and clinics throughout the state.

• Information on finding an attorney and legal aid resources.

• Tips and resources on avoiding foreclosure rescue scams.

• Explanations of relevant terms in foreclosure and loan modification.

• Links to the Florida Attorney General’s website and the U.S. Department of Housing and Urban Development.

• For attorneys, the site provides training resources, ethics alerts, and federal and state agency resources.

Bar Unlicensed Practice of Law Counsel Lori Holcomb said her office continues to monitor the housing crisis for UPL, but has yet to see any UPL problems associated with the fraud being uncovered in foreclosure documents, “because it is dealing with the law firms, and the nonlawyers are working under the supervision and direction of attorneys.”

The UPL Department was active in filing injunctions where nonlawyers were offering loan modification services that stepped over the line into the practice of law.

“We are just not seeing that as much anymore, because of changes in the laws that preclude nonlawyers from taking up-front fees,” Holcomb said.

Holcomb, who also serves as counsel for the Florida Registered Paralegal Program, cautioned that if FRPs are working for firms engaged in unethical foreclosure activities, “that could affect their registration, and they could have their registration revoked.”

So far, she said, none of the paralegals involved in current investigations are FRPs.

Other Bar activities include:

• The Florida Bar has had a representative on the Attorney General’s Mortgage Fraud Inter-Agency Task Force since April 2009. The Bar participated in each of the housing forums presented by the AG and the task force and has been monitoring the information exchange for both lawyer regulation and the prosecution of the unlicensed practice of law functions.

• The Florida Bar is coordinating with other state agencies, including the Office of Financial Regulation, and federal authorities in gathering information and investigating allegations.

• The Bar issued an Ethics Alert to lawyers on providing legal services to distressed homeowners, posted on the Bar’s website. It was prompted by the loan modification, short sales, and other rescue services issues.

• The Bar’s prosecutors in Lawyer Regulation have been working at the local level and in Tallahassee to share information with the Attorney General’s Office on investigations of mutual interest and to identify any misconduct by lawyers.

Foreclosure Fraud