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Hybrid Attorney-Real Estate Licensee Arrangements Issues and Outreach

Hybrid Attorney-Real Estate Licensee Arrangements Issues and Outreach. Under Section 10131 (d) of the Business and Professions Code, real estate brokers can lawfully perform loan modification services.

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Hybrid Attorney-Real Estate Licensee Arrangements Issues and Outreach

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  1. Hybrid Attorney-Real Estate Licensee Arrangements Issues and Outreach

  2. Under Section 10131 (d) of the Business and Professions Code, real estate brokers can lawfully perform loan modification services. • Section 2945.1 of the California Civil Code specifically exempts brokers from some of the strict requirements of the Mortgage Foreclosure Consultants Act. Loan Modification Activity

  3. California licensed attorneys who render loan modification and/or foreclosure consultative services in the course of their practice as attorneys-at-law are exempt from the Real Estate Law and the Mortgage Foreclosure Consultants’ Act in the Civil Code, and can lawfully perform such services. Loan Modification Activity

  4. Under current law, Lawyers, unlike real estate brokers, are able to collect fees in advance from clients even after the recordation of a Notice of Default. • Lawyers do not have the same restrictions as real estate brokers with respect to the acceptance of advance fees. • An association with a lawyer seems to add an air of legitimacy. ‘Attorney-Affiliated’ or ‘Attorney-Backed’ Entities

  5. Lawyers collecting advance fees (or retainer fees) and sharing those fees with the referring real estate brokers and/or salespersons. • Lawyers hiring Real Estate Licensees and Supervising Licensees as Legal Assistants, Paralegals, or some other sort of legal office personnel. • Lawyers as ‘in-house’ counsel in real estate companies. ‘Attorney-Backed’ Scenarios

  6. Is the business model simply an unlawful scheme to circumvent the prohibition against the collection of advance fees by a real estate licensee after the recordation of a NOD? • Is the lawyer actually performing legal services and providing a valuable service to individual clients? • Is the lawyer just a “front” and/or a non-participating magnet for business from desperate homeowners? Raising Ethical and Legal Questions

  7. Is the real estate licensee who is working with the lawyer a real estate “salesperson” engaged in real estate licensed activity? • If a non-lawyer real estate licensee is working on loan modifications in a law firm or “law” business, is the real estate licensee a law firm employee working under the supervision of a licensed lawyer, or is the licensee “practicing law” without a license? Raising Ethical and Legal Questions

  8. Outreach to California State Bar • November 18, 2008 in San Francisco • March 18, 2009 Webinar • April 2009 in Los Angeles and San Francisco DRE Reaching Out

  9. Results of Outreach • State Bar now actively investigating hundreds of cases where lawyers are involved in the loan modification and foreclosure rescue business. Many cases also involve real estate licensees. • Issuance of Ethics Alert to California Lawyers on “Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.” • California Bar Journal published an article entitled “Bar Issues Foreclosure Ethics Alert.” • State Bar actively examining the accuracy and propriety of attorney print, radio, television and Internet ads for loan mod and foreclosure prevention services. DRE Reaching Out

  10. DRE continues to work with the State Bar and other federal, state, and local public service and law enforcement partners: • FBI • US Attorneys • State Attorney Generals • District Attorneys • City Attorneys • FTC • HUD DRE Reaching Out

  11. If contemplating a business relationship with a lawyer to perform loan modification or foreclosure prevention work: • Carefully review the State Bar’s Ethics Alert or article discussing the Alert; • Check the accuracy of the statements of the lawyer’s ads; • Determine the legitimacy of the lawyer by reviewing his/her disciplinary history (http://www.calbar.ca.gov/state/calbar/calbar_home.jsp), bar membership records and experience in the area of loan modifications and foreclosure consulting. In Conclusion:

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