California’s role as the scam’s epicenter also is reflected in more than 2,300 orders to halt illegal mortgage modification tactics issued by the state’s Department of Real Estate from October 2008 through January of 2014. It’s not clear how many of these orders stemmed directly from misconduct by attorneys.
Still, many lawyers plied the foreclosure-rescue trade for years in California, Florida, New York and other states in the face of repeated warnings, disciplinary rulings by state bar associations and “cease and desist” orders from civil law enforcement agencies, such as state attorneys general, the Center’s investigation found.
Even though the mortgage crisis has abated in many regions of the country, and complaints have fallen off, they remain a concern.
“This is still going on, surprisingly,” said Melanie Lawrence, deputy trial counsel at the State Bar of California. “One would think over time [lawyers] would come to understand that this is unethical and illegal and stop doing it.”
The California Bar has nearly 100 disciplinary cases either pending or still being actively investigated, officials said.
The Center for Public Integrity examined more than 300 loan modification disciplinary actions taken since early 2009 against attorneys licensed either in California or Florida. (Disciplinary reports from New York aren’t searchable by type, according to the New York State Bar Association.)
While they typically accuse lawyers of multiple violations of consumer protection statutes and legal ethics codes, authorities haven’t been particularly eager to revoke an offender’s law license.
That’s happened in less than a third of California actions, including a lawyer charged in a relatively rare criminal case with bilking thousands of homeowners out of $12 million. Less than 15 percent of the Florida Bar’s orders called for disbarment, records show.
Case files show many errant lawyers had been approached by telemarketers who for decades have flourished in Sunbelt locales, particularly in Florida and California. Some partnered with telemarketers or hired sizable staffs of non-lawyers who handled most of the work but were not properly supervised, as required by Bar rules.
Some practitioners admitted they were overwhelmed by the torrent of business telemarketers could send their way, and rarely had any contact with, or did any actual legal work for, their clients. In disciplinary hearings, some lawyers admitted they were lured in by the easy money they made, while others insisted they did nothing wrong.
As part of their punishment, many lawyers have been ordered to make restitution, at least to people who took the trouble to lodge formal complaints against them. Many don’t pay up, however, pleading poverty. Nearly three dozen of the disciplined California attorneys, many responsible for major consumer losses, filed for bankruptcy protection, court records show.
The California Bar’s client security fund has stepped in and paid out nearly $16 million to compensate people who lost money to about 200 foreclosure lawyers. But half of that payout arose from 10 high-profile cases in which authorities estimated consumer losses were much higher. Most victims haven’t received any compensation.
The Florida Bar’s client security fund, which is more restrictive in compensating victims, has paid out about $400,000 since 2010 for mortgage-relief misconduct involving about 20 attorneys, according to the Center’s analysis of Bar records.
Though they’ve won many large eye-popping court judgments, federal law enforcement agencies have had a tough time actually collecting from offenders.
Most of the $341 million in court judgments the FTC and the Consumer Financial Protection Bureau secured in more than two-dozen enforcement cases since 2009 have been “suspended due to defendant’s inability to pay,” court records show. However, the CFPB is drawing on a special “victim relief” fund to pay out about $23 million.
William Goodrich, a Harvard-educated real estate lawyer well into his 70s, didn’t pay the $38 million default judgment that grew out of his role in a major California loan-modification operation called A to Z Marketing, which the FTC sued for fraud in July 2013.