The lawyers are starting to circle.
The latest twist in the foreclosure crisis has created an uncertain atmosphere ripe for exploitation.
At issue is whether banks improperly evicted borrowers from their homes by rubber-stamping reams of unchecked foreclosure documents. Federal and state regulators are investigating.
It’s a glimmer of hope for anyone on the brink of eviction and a troubling development for new owners of recently foreclosed homes. In this time of confusion, here are some key points to remember about working with a lawyer:
■ Spotting bad actors: In at least a quarter of loan modification scams reported in the past year to NeighborWorks America, a nonprofit housing group, victims said they were approached by a lawyer or someone posing as a lawyer. In other cases, scam artists turned out to be lawyers who were disbarred or unlicensed.
Scams typically lure victims with promises of big payouts. But any preemptive guarantee of a favorable outcome should be a red flag. The prevailing wisdom of the moment is that the unfolding saga will merely delay foreclosures.
Another warning sign is if you get an unsolicited call from a lawyer. American Bar Association guidelines prohibit lawyers from cold calling prospective clients. Written solicitations and prerecorded calls are OK, but need to be marked as advertisements.
■ Enlisting the right help: An attorney may not be necessary. If you want only to delay a foreclosure and your case is among those that have been suspended, that might give you the extra time you were looking for. But if you think your foreclosure is moving along improperly and want to contest it, professional help is probably a good idea.
A nonprofit counselor may be able to provide all the help you need. NeighborWorks maintains a national database of counseling agencies that provide free help at findaforeclosurecounselor.org.
If you feel your case demands a lawyer, be sure to look for one with the right experience. A foreclosure lawyer may specialize in modifying mortgages yet have no experience taking lenders to court.
Regardless of the situation, vet any lawyer’s credentials, including any disciplinary actions.
Then there are those on the other side of the equation — buyers of foreclosed properties who fear their homes could be taken back. It’s probably preliminary to hire a lawyer if no one has made a claim on the house. But it’s a good idea to call the title insurer and ask about what’s protected.
■ Understanding costs: Most lawyers charge hourly rates between about $150 and $1,000.
Some cap charges to allay fears that costs could stack up indefinitely. Even if a cap isn’t offered, it’s a good idea to request a cost estimate, in writing.
For borrowers suing lenders, a lawyer may work for a hybrid payment of a fee plus a percentage of the settlement. If he thinks a case has class-action potential, the lawyer is paid only after a settlement.
Candice Choi Associated Press October 14, 2010