State Bar Issues Foreclosure Ethics Alert; Raises Concerns of Fee Splitting and UPL

The California State Bar has been receiving an unprecedented number of calls from consumers and lawyers relating to the foreclosure crisis, prompting an Ethics Alert from the Professional Competence Office.

The prosecution arm of the State Bar has been getting almost 1,000 calls or inquiries a month from consumers concerned about lawyer actions relating to loan modifications and foreclosure. The volume of calls about foreclosure to the State Bar’s Ethics Hotline, a free confidential research service available to California lawyers, has jumped to between one and two dozen a day.

“The most important thing is for lawyers to understand this area is fraught with danger from an ethics point of view,” Los Angeles litigator Jon Rewinski, who drafted the ethics alert, told the California Bar Journal.

That is not to say, he added, that homeowners are not entitled to legal counsel. In fact, he emphasized, “Distressed homeowners should seek legal advice as one of their options.”

But lawyers need to beware that some foreclosure consultants may be trying to sidestep strict rules on such issues as splitting fees, upfront payments and unauthorized practice of law, and lawyers need to be especially careful when working with individuals or companies dealing with foreclosure and loans.

Founded in 1927 by the state legislature, the State Bar of California is an administrative arm of the California Supreme Court, serving the public and seeking to improve the justice system for more than 80 years. All lawyers practicing law in California must be members of the State Bar.