Taking 2nd Mortgage to Pay the Foreclosure Lawyer

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“Until recently, foreclosure defense would have been considered the lowest of the low — below the divorce guys, below ambulance chasers,” said Mr. Oppenheim, who practices in Weston, Fla. “The idea was inconceivable that you might have legitimate defenses when your client did not pay the bank that had lent them a sum of money.”

Then foreclosure lawyers started deposing bank employees, who admitted that their behavior in preparing court documents was negligent. That was quickly followed this fall by freezes imposed by some of the lenders. All 50 state attorneys general have joined forces to investigate and reshape banks’ foreclosure practices.

November 6, 2010

EDITOR’S COMMENT:   Those of you who have attended my seminars know that I have discouraged the use of mortgage language in the retainer agreement with the client. It has been my opinion that the ethical and disciplinary rules governing lawyers in most states at the very least create a chilling effect on the use of such retainer agreements and may result in disciplinary action against the lawyer. I still believe that the language contained in the ethical and disciplinary rules could be used to sanction lawyers if they use a retainer in which they take an interest in the real property that is the subject matter of the litigation. However, increasingly widespread use of this feature apparently has given pause to the bar associations and in particular to prosecutors who bring grievance actions against lawyers.

While I have consistently cautioned lawyers against such practices it has also been my opinion that an allowance for a second mortgage or junior lien on the property conditioned on success in litigation is the only practical solution to allow the average person access to the courts with representation by competent counsel.

My suggestion is that before you use this type of retainer you send a copy of it to the Bar Association that regulates your practice of law and tell them in a cover letter what you intend to do. I would also call the Bar Association and ask them. If they give you a letter or publish a rule that allows this kind of retainer agreement, then you are home free. If they don’t answer or they don’t give you a clear answer, you must understand that you may be taking a risk.

Taking 2nd Mortgage to Pay the Foreclosure Lawyer


NY Times: 07lawyers.html?ref=business

For some Florida residents, the price of getting out of foreclosure will include taking on a second mortgage — payable this time to their lawyers.

The new mortgage, which takes effect only if the foreclosure is dismissed and the homeowner’s debt to the bank is reduced, is controversial among defense lawyers, some of whom call it “creepy” and “crass.” Yet even they acknowledge it offers a solution to a vexing question: How do they get paid?

After recent revelations that banks were sloppy in processing many foreclosures and in some cases lack standing to seize a house, potential clients seeking to challenge their lenders are flocking to lawyers. But while these distressed homeowners might have a case, they generally lack the resources to pay legal fees. Being in foreclosure usually means being broke.

“We thought, ‘Why don’t we use a bit of ingenuity to find an affordable way to represent them?’ ” said Peter Ticktin of the Ticktin Law Group in Deerfield Beach, Fla. “It’s a new model, a new paradigm.”

Foreclosure defense is a new legal specialty whose strategies and techniques are still being worked out. Mr. Ticktin, who has some 3,000 foreclosure clients, says his plan to collect fees by taking another mortgage on his clients’ properties has already been copied by other firms.

The Ticktin mortgages resemble the loans that the clients originally got from Countrywide, GMAC and other lenders. Each will be a contractual obligation with the law firm, labeled as a mortgage and structured like one, too, with the client paying a certain sum every month and using the house as collateral.

Unconventional payment structures are becoming popular in the foreclosure hotbed of Florida. Whether they yet have caught on elsewhere is unclear. Certainly, Mr. Ticktin is far from the only lawyer being forced to innovate.

“We can put in $100,000 of our time but over the length of a case be paid only $6,000 in monthly fees,” said Thomas E. Ice of Ice Legal in Royal Palm Beach.

Mr. Ice, Mr. Ticktin and many other Florida foreclosure lawyers typically receive a few hundred dollars a month from each client. To supplement that, they seek legal fees from the banks they successfully challenge as well as contingency fees.

Contingency fees are standard in cases in which the client has little money but there is the possibility of a large payout. A slip and fall on a store’s wet floor or a medical malpractice claim are classic contingency cases. If the plaintiff wins, insurance companies ultimately foot the bill.

In foreclosure cases, however, the client pays the contingency fee. While such an approach is sometimes used in commercial litigation, this is a first for consumer cases, said Lester Brickman, a professor at Cardozo Law School in New York.

“For a lawyer to supplement or replace the banks as a long-term mortgage creditor of homeowners leaves me a little queasy,” said Mr. Brickman, an expert on contingency fees. “It’s an invitation for the public to say, ‘There go the lawyers again.’ ”

If the Ticktin lawyers — there are 19 now and will be two more soon — cause the original mortgage to be nullified or reduced because of the bank’s misdeeds, the client must take out a new mortgage for 40 percent of the savings.

For instance, if the mortgage was $500,000 and is reduced by the bank to $200,000, the client would owe Ticktin 40 percent of $300,000, or $120,000, minus any legal fees paid by the losing bank as well as any monthly sums paid to the law firm.

Clients would be attracted to this arrangement because they might save nearly $200,000 and avoid foreclosure. They can either stay in their house or — after another legal hurdle — sell it.

Mr. Ticktin conceded there were potential problems with this “pay later” plan, starting with the uncertainty over whether the clients could and would pay the debt over a period of many years and what Mr. Ticktin’s response would be if they did not.

“We would never enforce the mortgage and foreclose,” he said. “We’re not in that end of the game. We’re not money lenders. We’re charging a small amount of interest” — four percent — “just to make it legal.”

For any of this to happen, of course, he has to win his cases. Successful foreclosure litigation can take years, and even if the banks are under fire few believe they will go out of their way to make it any easier. But even if people in foreclosure never win a settlement from a bank, they could stay a few more months in their homes by filing a lawsuit.

The Ticktin firm is growing rapidly, adding three clients a day. If all 3,000 clients ended with mortgages payable to the firm, Mr. Ticktin said, “that would be wonderful, but realistically I’m expecting fewer.”

So far, he said, he has mortgages on the homes of five clients. None were available for comment.

Other lawyers said they were still puzzling over how to proceed. Roy Oppenheim is a veteran foreclosure defense lawyer, which means he has been doing it two years.

“Until recently, foreclosure defense would have been considered the lowest of the low — below the divorce guys, below ambulance chasers,” said Mr. Oppenheim, who practices in Weston, Fla. “The idea was inconceivable that you might have legitimate defenses when your client did not pay the bank that had lent them a sum of money.”

Then foreclosure lawyers started deposing bank employees, who admitted that their behavior in preparing court documents was negligent. That was quickly followed this fall by freezes imposed by some of the lenders. All 50 state attorneys general have joined forces to investigate and reshape banks’ foreclosure practices.

Mr. Oppenheim now has 500 clients, twice as many as a year ago, all whom are paying $500 a month. “I’m happy and thrilled to wake up in the morning and be a real estate attorney in Florida,” he said. “We’re starting to look at what the definition of exemplary representation would be.” That would allow them to charge higher fees.

Some foreclosure lawyers have a more traditional approach, starting with a firm grip on clients’ expectations.

“Any time someone calls me and says, ‘I want to keep the house and get my mortgage gone,’ I say, ‘That’s not realistic or fair,’ ” said Margery E. Golant of Boca Raton, a former executive at the lender Ocwen.

She takes foreclosure clients who can afford to pay as they go; there are a few. “I don’t want to be my client’s creditor,” she said. “I want to be on their side.”

Counting on clients to shoulder a large legal bill after the case is over can be fraught with conflicts, said Mr. Ice, the Royal Palm Beach lawyer.

In some cases, he said, the best a client might be able to do was get a mortgage modification. But the client might reject a bank’s offer if it did not allow him enough every month to pay Mr. Ice as well.

“It’s touchy,” the lawyer said. “I don’t ever want to have a client say, ‘I’m not taking the deal because I can’t afford to pay you.’ ”

10 Responses

  1. pelucheven,

    Agree – but think it should be the CEOs – who made out like bandits on the whole fiasco. Return the money that was fraudulently procured.

  2. Concerned

    Love THE A MAN – but no one can buy “time” for fraud.

    1) You have lost valuable time to negotiate with the actual creditor due to fraud and fraud on the court.

    2) Documents will have to be fraudulent – again- to show proper and complete chain of conveyance to the CURRENT and actual creditor.

    3) They should have to disclose the charge-off process and what “collection rights” were purchased for. Or, if still remains with the non-named “BANK” – why did that BANK refuse to identify itself in and why did they not comply with so called mandated loan modifications.

    4)All of this amounts to counter-claims – which then revert back to fraud in the origination and securitization..

    So – if anyone wants to correct all now – they have a problem. – they will have to admit all of the above – and be able to defend – why the current creditor was never named in the foreclosure action and in violation of federal laws.

    Courts would love for this to happen – current creditor comes forward – thus, they will try to assume that all is fine since real creditor is now named. Problem is – all the steps they took to conceal all – from origination to securitization – to collection rights – to fraudulent foreclosure.

    Maybe – you will still lose home – but – if the courts behave as THEY SHOULD BEHAVE – not without DAMAGES to you.

    All foreclosure action challenges should include – counter-claims for fraud and violation of federal and state law.

    Just let one FEDERAL court grant this – and they are finished.

  3. Linda,

    I wholeheartedly agree with you!

  4. I know an Excellent and Affordable Foreclosure Defense lawyer in Miami D. Graham 305-445-9185. Free first time consultation.

    Dillon Graham of Graham Legal has won the distinction of being listed in Florida Trend’s Florida Legal Elite 2010, a distinction only 1.8% of active and practicing lawyers in Florida achieve


  5. Contingencies between lawyers and clients seems inevitable if we are truly going to seek justice en masse and get a shot at changing the status quo. People are being thrown on the streets right at this very moment just because they don’t have legal fees. That’s wrong, especially if they have a good case.

    If you want to keep your home, you are better off with a lien on it than just throwing it to the bank wolves. When you get on your feet you can refinance out of it and pay off the legal fees or just sell it. At least you have a place to live, for cryin’ out loud!
    To me, this is actually a very good way for lawyers to redeem their reputations. They benefit and so do we. Win win. Imagine saying to someone, “I had this great lawyer and he fought for me and….”

    Some of us would not have gotten into this mess if the banks had kept their promise to work with us. They essentially forced us into a corner. They dragged things out and bled us dry. Then in our weakest state, they kicked us to the curb and came in for the kill. Sink or swim.

    Letting the banks get away with this behavior and thievery because homeowners can’t afford legal services is a travesty to justice. It keeps their fake system going and creates a second round of victims. Or even a third round, if you count among us the ones who lost thousands to loan mod outfits. Some of us are low on funds because we’ve been fighting all along to hang onto our homes and/or the right attorneys were not available at the time. It’s been a real educational process, to say the least. Moreover, it is exhausting to one’s health. When you have brokers climbing your fences and process servers yelling expletive names at you and you are a prisoner in your own home trying to scare up legal fees…you can’t blame people for giving up. But he who gives up first, loses, right?

    We’ve been rejected by several attorneys on the basis of funding. We know several homeowners who are fearful of hiring attorneys for fear of getting ripped off again. Attorneys especially don’t like you if you’ve already been foreclosed on. More work for them, I guess. That said, I know one who prefers these cases because, depending on your situation, there are more potential damages.

    Perhaps our legal fees could be “table-funded.” LOL Attorneys could conceal the identity of the parties and cut themselves out of the picture.
    They could become the new servicers. Okay……JUST KIDDING !!

    Truly, a good legal defense fund would be helpful, as well as what New York did in having attorney’s fees payable by the opposition. But having funds controlled by state or federal agencies is dubious, as we’ve already seen. We don’t want to have to apply for these funds by proving hardship all over again and all that rigmarole and getting stuck waiting for help from another system. That info. could also be used against us in some way if it falls into the wrong hands.

  6. A Man,

    Are you saying that the attorneys can only buy us time until the offender-pretender-lender dummies up documents and gets the judge paid off so that we loose the case?

    If there is a break in the chain of title, the only way the offender-pretender-lender can come up with paper that does not show that problem is to dummy some replacement papers up.

    Are you saying that is what is ahead? The o-p-l frauds already have the regulators crawling out from their hiding places.

    In some cases, the flawed papers are already on record with the court. Just examination of what has already been presented in certain of those cases show problems that can not be explained away without attempting to WITHDRAW the papers they have filed with the court and recorded documents on file with the county recorder’s office.

    Now the ONLY solution I have heard of for that situation is to somehow get the borrower to agree to sign new papers. What borrower will do THAT without a LOT of incentive (i. e. $$$)?

    If the court sees the chain of title documents as flawed, any attempts to force a modification are not going to fix the REAL problem – the CLOUDED TITLE.

    Therefore, I do not see how certain of these cases can avoid a quiet title action.

    Any settlement of such a situation would need the title cleared. The current offender-pretender-lender would need to take legal responsibility for any potential future presentment of the note. Making any deal with the current o-p-l has no protection if said o-p-l goes out of business. Who would want to buy such a property? Why would a borrower enter into an agreement to replace the faulty papers on their property if the title is clouded? Some day the real papers could still possibly turn up if a quiet title action has not already been completed.

    Therefore I see the only way that the current occupants are put out of homes that have such a clouded title is through the complicity of the judiciary, i.e., the refusal to hear cases or to look at the evidence of the clouded titles.

  7. The real kicker would be for the bankers to be forced to set up massive foreclosure prevention and mitigation funds. These funds shall be given to the counties to manage and and administer. If any one has an issue with a bank they should file a claim to have access and the fund may provide the funding for the case to be tried in court.

    These banks always will avoid costs, they love taking the risk because they claim to be abiding capitalist system entities (a total lie) but instead when they get in trouble and the economy is ruined by their negligence, irresponsibility, felonious behavior they will ask to have their loses and their crimes socialized.

    Great job America!

  8. Not only do we have the effect of overinflated mortgages and not only the effectd of over leveraged loans and loans people can not afford. WE HAVE THE EFFECT OF BROKEN CHAIN OF TITLE AND MULTIPLE SALES OF THE SAME LOAN. Their is no amount of money in the world to pay the loans back.

    To the Banksters if you cant do the time dont do the crime.
    and dont pickup the Soap Bar in the Showers.

  9. The best attorneys can do is buy you time. This is a political issue and the only way we can win is if the Politicians and/or mainly Attorney Generals and District Attorneys start enforceing existing laws.

    Then The attorneys can afford or it is worth there while to take this on a contingency basis.

    The amount of crimes the banksters commited against us the paying and non paying borrower is worth much more than our properties.

    Just one alleged crime. Once the Banks broke the chain of title. They most probably sold the same loan multiple times. Co Mingling of Funds. To cover it up they dont really know who you the borrower supposedly owe the money too. They also can’t pay the loan (Note) to multiple investors. This is just the beginning of the mess.

    This is why we need the Government to intervene.

    This is why the only way out of our economic mess is to make an example of these Banksters who took advantage of the politicians the investors and the borrowers.

    This is why the politicians after the elections are gonna take out their frustrations on the banksters (we see that with the halt of foreclosures at least Bank of America)



  10. I see a conflict of interest with any lien on anyone’s home. The pay as you go approch is the best and cleanist way. What if you lose the case, then the lawyer would forclouse on you for non payment with a real lien. Stay away from this one please. It will only add to your misery.

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