CBJ - May 2011 #06. Loan modification charges could draw online alert.

AuthorBy Diane CurtisStaff Writer

California Bar Journal

2011.

CBJ - May 2011 #06.

Loan modification charges could draw online alert

The California LawyerMay 2011Loan modification charges could draw online alertBy Diane CurtisStaff WriterState Bar Chief Trial Counsel James Towery is following up a proposal for a consumer alert against lawyers accused of stealing from clients with a similar proposal for lawyers accused of significant loan modification misconduct.

At its May 12 meeting, the State Bar Board of Governors is slated to vote on a request to post a very visible alert - large, bold lettering at the top of an attorney's State Bar profile page - when disciplinary charges are filed or a petition for involuntary inactive enrollment is granted against an attorney for misappropriating more than $25,000 in client funds. Currently, disciplinary charges are public and are posted towards the bottom of the profile page. Petitions filed under Business and Professions Code section 6007(c) - applications from State Bar prosecutors for involuntary inactive enrollment when there is "a substantial threat of harm to the member's clients or to the public" - are not posted at all although they are public.

Now the prosecutor's office is seeking a 45-day public comment period for a proposal to trigger a consumer alert for "significant" loan modification misconduct. The alert would be posted if 15 or more cases are filed in a notice of disciplinary charges or if a petition for involuntary inactive enrollment, based on the member's threat of harm to the public, relies on any loan modification misconduct.

"One particularly challenging aspect of ensuring public protection against mass loan modification misconduct by attorneys is minimizing the risk of continuing harm when a lawyer remains on active status pending the resolution of filed disciplinary charges," Towery said. A consumer alert, along with a disclaimer that attorneys are presumed to be innocent until charges are proven, is warranted "to protect current or prospective clients from additional harm."

Since 2008, when the economy collapsed and the number of foreclosures skyrocketed because homeowners weren't able to maintain payments on easy-to-get mortgages, the State Bar has received about 4,800 complaints about lawyers engaging in loan modification misconduct. Those engaging in misconduct typically...

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