Lawyers — especially solo and small firm practitioners and new lawyers — are increasingly the target of loan modification scammers. Do not risk your license! Learn to recognize and avoid these scams.

About Loan Modification Scam

The scammers seek to recruit lawyers in an effort to circumvent state and federal legislation enacted to protect homeowners from unfair or deceptive practices, including a ban on the collection of upfront fees. Because lawyers are generally exempt from the legislation, scammers are trying to exploit this loophole by soliciting, employing, and partnering with lawyers to provide purported loan modification services.

These relationships may violate the Washington Rules of Professional Conduct and could result in lawyer discipline. Do not risk your license. Recognize these fraudulent schemes for what they are – scams. Avoid giving assistance to these scam artists.

How to Identify a Scam

Here are some red flags to help you recognize a loan modification scam:

  • Accepting fees for little or no work in exchange for allowing non-lawyers to use the lawyer’s name, retainer agreement and client trust account;
  • Engaging in a widespread telemarketing operation staffed by non-lawyers;
  • Allowing the lawyer’s or law firm’s name to be used in solicitations to prospective clients without actively providing legal services in connection with mortgage assistance relief services;
  • Misrepresenting any material aspect of a lawyer's or law firm's legal services, including the likelihood of getting a favorable result, an affiliation with a governmental agency or other costs of their services;
  • Paying a referral or marketing fee to a foreclosure consultant or other person for referring distressed homeowners to the lawyer;
  • Sharing legal fees with non-lawyers;
  • Partnering with non-lawyers in connection with offering mortgage assistance relief services; 
  • Failing to supervise subordinate attorney and non-attorney work product;
  • Helping non-lawyers engage in the unauthorized practice of law;
  • Failing to keep clients reasonably informed about their matters, including other available legal options and the potential for adverse outcomes; and
  • Failing to work diligently and competently on behalf of clients.

For lawyers who offer mortgage assistance relief services as part of their practices, upfront fees or retainers can be accepted only if the lawyer performs legitimate legal services and the money is deposited in a client trust account and withdrawn only as actual legal services are performed and the client is notified prior to each withdrawal.

Report a Scam

If you believe you have been contacted by a loan modification scammer, please report it to these agencies 

Questions?

Ethics Questions

Please call our Ethics Hotline at 206-727-8284 or view our other Ethics Resources

Information about the Mortgage Assistance Relief Services Rule

The FTC offers guides for lawyers, The Mortgage Assistance Relief Services Rule: A Compliance Guide for Lawyers, and for businesses, The Mortgage Assistance Relief Services Rule: A Compliance Guide for Business.


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