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Re: When Banks Won't Help Homeowners,,,,,U.S.
Although there is a federal ban on upfront fees for mortgage mods, lawyers arranging modifications enjoy an exception to that rule, provided they obey state laws and put fees in a trust account until services are performed. The American Bar Association argued to the FTC in a March 2010 letter that such exceptions were warranted because totally disallowing upfront fees "would make it difficult or impossible for many consumer debtors to obtain the legal services that they desperately need to help negotiate changes to their residential mortgages with their lenders and keep their homes." Florida attorney Robert Rosenwasser certainly sees things this way. He says his $2,000 upfront fee for a loan modification is much cheaper than what it would normally cost to hire a lawyer. He says he has about 400 clients and modifies about 25 mortgages every month.
"We have made the highest quality foreclosure defense accessible to working class people," Rosenwasser said in an interview. "We are, I would say, a consumer advocate firm. I look out for my clients. I consider them chickens to be plucked by what I consider a very unscrupulous real estate market, and the banks are extremely unclear on what they will do in regard to loan modifications."
A sign outside Rosenwasser's Miami office -- "ASK ABOUT NEW GOV'T PROGRAMS" -- boasts of free consultations for loan modifications and foreclosure defense for prospective clients. Photo by Laura Bassett.
And Rosenwasser bridles at any suggestion that he doesn't deliver for homeowners. He objects to a February HuffPost story about a client who complained that Rosenwasser failed to win a promised modification, even though the client's bank confirmed that it didn't receive all the paperwork it needed from Rosenwasser to process the modification.
"How about a retraction. Have you no shame," wrote Rosenwasser in one email on Feb. 25. In another email, he wrote, "You wanted a sexy story at my expense, why don't you have the professional integrity to recognize that the entire scenario was a fabrication."
While Rosenwasser played an early role seeking a modification in that case, the client, Julio Salazar, only got one after a friend independently pestered the bank and sent in a complete financial package, without any help from Rosenwasser. Emails between Salazar's friend and bank executives show that the bank considered the material Rosenwasser supplied for Salazar's modification "deficient."
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Rosenwasser told HuffPost he refused to refund Salazar's upfront fee, despite having failed to modify either of his mortgage loans, because Salazar broke his contract by having a friend interfere with the process. He defends the fees he charges clients, maintaining that lawyers "are always allowed to charge up front fees in the jurisdiction they practice."
The state of Florida banned upfront fees for loan mods in 2008, but the law exempts lawyers who provide foreclosure-related services if the foreclosure relief is "ancillary" to the lawyer's representation of the homeowner as a client. In other words, lawyers can't make modifications the central reason they're doing business with a client in order to be eligible for the exemption -- though experts say the term "ancillary" can be subject to interpretation.
In a follow-up interview, HuffPost asked Rosenwasser if his business fits that definition.
"The truth is, I don't know. I never had a problem with charging upfront fees. As far as I know attorneys have always been exempt," he said. "I've never had an issue with the Florida bar with charging people for foreclosure defense and I've never even looked into it. I never looked at the statute. I've always been under the -- maybe it's a misunderstanding that as an attorney I can charge people these fees."
A spokeswoman for the Florida Bar said that it has several investigations into Rosenwasser's practice "regarding loan modification, pending at the Grievance Committee level." Rosenwasser said that the Florida Bar hasn't said anything to him about his upfront fees.
Federal law requires any money lawyers charge upfront to be placed in a trust account and not withdrawn until some lawyering is done. "We don't put anything in escrow," Rosenwasser said.
So what does Rosenwasser's office provide for $2,000 that homeowners can't get for free from a housing counselor certified by the Department of Housing and Urban Development?
"The HUD-certified counselor's going to be gone in three weeks or two weeks or that weekend," Rosenwasser said. "We're going to be there three months later. And the process in my office that they begin with is gonna be with them for six months. The HUD-certified counselor is not reachable after a couple weeks."
"Additionally, we speak Creole in our office, we speak Spanish in our office," he said. "We can overcome language barriers."
But HUD, too, offers a huge array of multilingual services, including Creole, Spanish, Russian, Vietnamese and Tagalog. Its counselors can follow individual cases for many months, HUD says.
"The average amount of time spent on default counseling is eight hours, and this is typically spread out over numerous interactions," HUD spokesman Lemary Wooley said. "This takes much more time and is more intensive than any other form of housing counseling. With free, quality services available, nobody should pay for foreclosure prevention counseling."
Marta Miller, 59, is another dissatisfied Rosenwasser client. When she lost her manufacturing job in Durham, N.C., in September 2009, she said her first priority was to work out a loan modification so she wouldn't fall behind on her payments and ruin her credit.
She said her bank, SunTrust, told her it wouldn't work with her to lower her monthly payments until she actually missed one, which she couldn't bring herself to do. "They said to get late, but that wasn't gonna happen," she recalled. "I'm never late on a payment."
SunTrust declined to comment on the case. "While we are not at liberty to discuss a specific client relationship or our internal policies and procedures," a spokesman said in an email, "generally speaking we work with clients on a case-by-case basis regarding potential loan modifications taking into account investor guidelines and the fact that every situation is different."
(Any borrower who is told to make late payments in order to get a modification should beware: even borrowers current on their mortgage are eligible for modifications.)
After getting nowhere on her own, Miller said she reached out to a Florida-based company called Friendly Financial Services, which promised her that in return for a $1,500 advance fee, they would have her loan modified within 30 to 60 days. She paid the money, and the company handed her case over to Rosenwasser.
"They said it would take one or two months, and [a Rosenwasser staffer] was supposed to call me back once a week to update me on my file, which she never did," Miller said. "Eventually she stopped returning my calls altogether, and they told me she had been in a car accident."
After more than six months of waiting, Miller said Rosenwasser's office finally called with a disappointing offer: Her bank had only agreed to lower her interest rate by three-fourths of a percentage point.
"I started freaking out, because I got a letter from the unemployment office around that time saying my benefits were ending in May," she said. "I thought, 'I'm not finding a job, I'm not getting unemployment, we're really gonna be in trouble.'"
Miller says she complained to Rosenwasser's office that they had not upheld their end of the deal, and his staffer told her that she should request a full refund since the bank was unwilling to work with them. But when she went to request the refund, she said she was denied because she had "broken her contract" by running out of unemployment benefits.
"My unemployment hadn't even run out yet," she said. "How did I break an agreement? I have no control over that. But they said part of the agreement was that I had to have a regular source of income."
Ultimately, Miller said her husband was able to refinance the loan on his own, but the Millers never received a refund from Rosenwasser.
"They scammed me big-time. It just makes me angry that these people, when you're down and out, they just throw you under the bus," she said. "With that $1,500, I could make three mortgage payments. And there's no telling how many people out there lost their $1,500."
Rosenwasser said Miller got what she paid for. "She did get a loan modification," he said. "She didn't like it, but she got one."
Maine and New Hampshire regulators have both issued cease-and-desist letters (PDF) to Rosenwasser for violating local laws by charging residents of those states upfront fees for mortgage modifications. Each state's order says local homeowners were put in touch with Rosenwasser by Friendly Financial Services. Maine's order refers to the company as an alias for Rosenwasser.
Phone numbers listed online for Friendly Financial Services are disconnected. "I ended up shutting them down. I threatened to call the FBI if they don't stop using my name," said Rosenwasser, who contends that the only problems his office has had were with out-of-state clients solicited by the company. "They had certain criteria they were supposed to bring people in on and they did not meet all their criteria."
Rosenwasser said he now only takes clients from Dade and Broward counties in Florida. He also said he's invested thousands in proprietary software that allows his office to track the status of pending modifications, and said he would put the HuffPost in touch with some satisfied customers. He eventually provided phone numbers for three people, only one of whom was willing to speak about his modification.
"He got me a loan modification in five to six months," said Fritzner Estinfil, a 42-year-old Miami resident who said he paid $2,000 for the mod. Asked if he was satisfied with the results, he said, "Pretty much."
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