Can Florida Attorneys Be Considered Foreclosure Rescue Consultants?

I was talking to an attorney recently about newly enacted FS 501.1377 and its application to lawyers in Florida.  The initial version/s of the statute contained a specific attorney exemption which was subsequently altogether removed in the version of the Act that has since become Florida law.

The Broken Credit Blog covered this problem six months ago on June 11, 2008 where we wondered if homeowners would be left in the lurch when desiring attorney legal assistance in filing bankruptcy, or in defending a foreclosure action.  Thankfully, on July 11, 2008 we reported that Attorney General Bill McCollum provided a limited attorney exemption which states (in part) that the FL AG “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” (emphasis added).

To put the Florida AG letter in perspective, he was responding to an inquiry made on behalf of bankruptcy attorneys (who no doubt were in upheaval with 501.1377 because they became the unenviable subject to provisions of BAPCPA in ’05).  And in answering their concern he most assuredly also wanted to aver foreclosure defense attorneys that they were not hindered in any way “when such person provides legal representation to a client with respect to a foreclosure”.

Contrast all of this with the California version of the Foreclosure Consultant Act which exempts attorneys in CA Civil Code 2945.1(b)(1) with the following text: “A person licensed to practice law in this state when the person renders service in the course of his or her practice as an attorney at law.”

The California version of the statute was enacted in 1979 (and amended in 1980 and 2004), whereas the Florida statute is brand new, literally only a few months old. In California, lawyers essentially run loss mitigation companies collecting legal fees for loan modifications, short sales, etc. and I have no problem with that.  The problem and liability arise, in my opinion, when an attorney in Florida offers to assist a homeowner with a loan modification, short sale, or other workout, exclusive of the client engaging him or her in response to the filing of a foreclosure of which the pendency of such “foreclosure proceedings (is) recorded pursuant to s. 48.23” [501.1377(2)(g)].

The serious question remains and undoubtedly case law will develop accordingly to determine what was the legislative intent behind removing the attorney exemption in FS 501.1377?

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.