By Gary Blankenship
Senior Editor

A new state law aimed at cracking down on scammers taking advantage of homeowners facing mortgage foreclosures will not affect the hiring of attorneys by those homeowners, according to Attorney General Bill McCollum.

In a July 8 letter, McCollum clarified that the provisions of HB 643 will not apply to the attorney-client relationship or the way attorneys are paid when they are hired to help distressed homeowners.

The bill regulates the activities of “equity purchasers” and “foreclosure-rescue consultants.” Early drafts of the bill specifically excluded lawyers from the bill’s restrictions and regulations, but that exemption was apparently accidentally dropped while the bill was amended as it proceeded through various committees.

That left many lawyers concerned their services — both when hired to defend a foreclosure action and to handle a bankruptcy that could forestall a foreclosure — might fall under the new law (F.S. §501.1377).

McCollum’s letter, sent to Bar President Jay White, addressed that.

“Pursuant to its authority under Section 501.1377(2)(b)2, the Office of the Florida Attorney General, Department of Legal Affairs, hereby approves for exclusion from the definition in this provision of a foreclosure rescue consultant, a person licensed to practice law in this state, when such person provides legal representation to a client with respect to a foreclosure,” McCollum wrote.

He also noted that the letter will “ensure that the attorney/client relationship is not adversely affected by this new provision. . . .”

“It’s an elegant solution to what was essentially a slip,” said Burt Bruton, chair of the Legislative Review Committee of the Real Property, Probate, and Trust Law Section.

“This is a very welcome development and this action by the Attorney General’s Office is a substantial step which should offer reassurance to those who are trying to assist homeowners facing foreclosure and especially those attorneys who are assisting victims of foreclosure rescue scams,” said Dade City attorney Michael Wasylik, who posted an online article about the glitch with HB 643. “This action brings the legislation more in line with the original intent of the bill as proposed by the attorney general, and is a significant step to ensuring homeowners have all of the resources they need to fight foreclosure rescue scams and also to raise any legitimate legal defenses they might have in foreclosure actions and bankruptcy cases.”

Bruton said the problem was the broad description of foreclosure rescue consultants could be read to include legal services, and the bill’s restrictions would severely affect the way attorneys are hired and paid.

Wasylik’s online article, as well as one by Jacksonville attorney Chip Parker, identified the difficulties mitigated by the attorney general’s action.

The bill requires a written agreement between the homeowner and the foreclosure rescue consultant, which is not a problem because most lawyers use signed fee agreements in such cases, Wasylik said. But it requires that homeowners have the contract for a day before signing it, and then have a three-day period during which they can cancel the contract.

In his article Wasylik noted that the four-day waiting period would carve a chunk out of the 20 days a homeowner has to respond when a lender files a foreclosure action. Further, Parker wrote, “If a person’s home is scheduled to be sold at a sheriff’s sale, only a Chapter 13 bankruptcy can stop it. If that person seeks the assistance of an attorney within four days of the sale, the attorney cannot help, and the house will be sold!”

Another, perhaps greater, difficulty is the bill requires that the consultant perform all services in the contract before getting paid, and that the consultant also must front costs and expenses. That addresses a common problem of the nonlawyer consultants charging hefty fees from panicked homeowners, and then not doing any work.

Until McCollum made it clear that it does not apply to attorneys, the new law would have required that lawyers not charge or collect any fees until all legal services were completed.