Paying a Foreclosure Defense Lawyer
The New York Times did a story over the weekend about how Florida foreclosure attorneys are charging homeowners facing foreclosure. I’ve read the article and, with respect to my colleagues, I’m disturbed. According to the article, Roy Oppenheim charges $500/month to his clients (every month the case is pending, no matter how little activity takes place in the case each month). Ice Legal charges a retainer, monthly fees, and a contingent fee. Peter Ticktin charges monthly fees plus a 40% contingent fee. As I see it, instead of trying to make their services as affordable as possible, these lawyers are trying to figure out how much they can get away with billing. I’m also troubled at the ethical quagmires created by these fee arrangements.
To illustrate my concerns, let’s take one of the examples in the article. If a client of the Ticktin lawyers gets the principal on his/her mortgage reduced from $500,000 to $200,000 (be it by modification, settlement, court order, or the like), then that homeowner owes the Ticktins $120,000 ($300,000 x 40% = $120,000). Perhaps worse yet, that $120,000 is secured by a mortgage on the client’s home. Hence, the $500,000 mortgage is reduced to $200,000, but there is now a second mortgage, payable to Ticktin, in the amount of $120,000, so the homeowner still owes $320,000.
Respectfully, isn’t it our job as foreclosure defense and bankruptcy attorneys to help homeowners avoid foreclosure? To try to reduce their debt? I realize this is a business, but I can’t help but feel that these fees are excessive. As I see it, why should Ticktin, Ice Legal, Stopa Law Firm, or any foreclosure defense attorney get a windfall if we’ve helped a client and obtained a principal reduction? Striving for favorable results is our job – it’s why we get paid. Sometimes favorable outcomes happen, sometimes they don’t, but either way, we shouldn’t get a windfall, particularly at the expense of our clients.
I’d be less disturbed about foreclosure lawyers charging a contingent fee if it was the lawyers’ only way of billing. For instance, if a lawyer somehow eliminates a mortgage from a client’s home, and hasn’t collected any fees, a contingent fee seems reasonable to me. In that scenario, the client now has a free and clear house and the lawyer helped obtain that result without getting paid, so a contingent fee seems fair. Unfortunately, there are two fatal problems with this line of thinking. First, it’s clear that these lawyers are charging more than just a contingent fee – they’re charging retainers and monthly fees, too. When the foreclosure defense attorneys are already getting a monthly fee, the contingent fee strikes me as excessive. My concerns are heightened in that regard because I find the $500 monthly fee excessive on its own. Bear in mind, in foreclosure cases, there are often many months of inactivity, where the lawyer does little or no work. As I see it, why should a lawyer keep collecting $500/month when he/she isn’t doing any work? I strongly believe the fees a foreclosure lawyer collects should bear some reasonable relationship to the work being performed.
Second, I agree with Margery Gallant, who opines in the article that the elimination of a mortgage and client owning a home free and clear is generally not “realistic.” There are undoubtedly exceptions, but the typical homeowner cannot expect that he/she can march into court and convince a judge to eliminate a mortgage and give the homeowner a free home. Don’t get me wrong – I’m always on the lookout for fact patterns that could lend themselves to this result. For the typical Floridian, though, this is not a realistic goal (especially with the climate in the judiciary being what it is). As such, I’m left wondering just what these foreclosure defense attorneys have to do to earn their contingent fee.
For example, suppose the foreclosure lawsuit is dismissed without prejudice, meaning the bank can re-file a separate suit and seek foreclosure. Should a foreclosure defense attorney be able to collect a contingent fee in that scenario? I’d argue “no,” unless the fee was very low. After all, the fees obtained should be commensurate with the results obtained, and a dismissal without prejudice does not lend itself to a $50,000 or $100,000 contingency. Unfortunately, I’ve seen contingent fee agreements that require such a payment even upon a dismissal without prejudice. As I see it, that’s grossly excessive.
Also, I strongly believe these fee arrangements are rife with conflicts. To illustrate, Tom Ice says he “doesn’t ever want to have a client say ‘I’m not taking the deal because I can’t afford to pay you.” Yet isn’t this the very dynamic that these contingent fees create? Using the example above, if the homeowner is offered a $300,000 reduction, doesn’t he/she have to think about whether he/she can pay the $120,000 mortgage to Ticktin before accepting the offer? If so, who is going to counsel the homeowner about that? Ticktin? How does that conversation go? “I’m glad you’ve been offered the $300,000 reduction – just be sure you can pay the $120,000 fee to me.”
Mr. Ticktin says he “would never enforce the mortgage and foreclose.” If that’s true, though, then why have this fee agreement in the first place? Clearly, these lawyers want to leave open the possibility of foreclosing on their clients’ homes, as otherwise they wouldn’t be including such language in their fee agreements.
Also, many homeowners facing foreclosure are candidates for bankruptcy. Using the same example, above, are the Ticktin lawyers going to give conflict-free advice to a client about bankruptcy if Ticktin has a second mortgage on the client’s home? How can they? Ticktin and the homeowner are directly adverse – the homeowner wants to eliminate the mortgage, which could happen via bankruptcy, whereas Ticktin wants to enforce it, which a bankruptcy would preclude. Undoubtedly, Ticktin’s representation to that client about the benefits of bankruptcy are impacted by its own interests in keeping the mortgage intact.
The more I study these fee agreements with other foreclosure defense attorneys, the more comfortable I feel with the fees being charged by Stopa Law Firm.
Mark Stopawww.stayinmyhome.com
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Mark,
Just read your posting after googling Ticktin which was prompted by reading the same article you did, and I am curious as to your fee structure. We have been doing the monthly thing with our Foreclosure Defense cases and I have had the getting paid for periods of inactivity debate with many other attorneys. The real issue is, at some point, at least half of the clients stop paying, you wind up behind because you feel badly for their predicament, and then find yourself filing a motion to withdraw and going to a motion to withdraw hearing that you arent getting paid for. You are also bearing the liability of the representation and the duty to maintain their file for the next however many years. I just think that the flat monthly fee charges are not as bad as you make them out to be, which is why I am curious as to how you are doing it. Maybe your way is better! I look forward to your reply.
Hi, Larry. Thanks for commenting. Give me a call and we can talk about this. Mark
I am a foreclosure defense lawyer in Connecticut and New York. I have been charging a monthly fee for several years. There is no upfront or contingency component. The client can cancel it at any time. I tell potential clients that there will be periods when not much work is done. The monthly fee eliminates the fear (the client’s and mine) that the client’s cash flow will prohibit the client from paying a bill, at hourly rates, for the periods when a lot of work is done. It’s better for both us if the lawyer fee is part of the client’s monthly budget.
I live in Florida and am considering foreclosure Defense. The attorney is asking $750.00 up front and $250.00 per month, is this a reasonable fee?
Best regards,
That amount is reasonable compared to what many lawyers charge. To illustrate, I’ve seen many charge $2,000 – $2,500 for a retainer and $500/month (or thereabouts). However, I don’t like the concept of a monthly fee. Many months, nothing at all happens in a case. I encourage you to give us a call and we can discuss our fees.
Mark… I really do not think you can lump an amazing foreclosure defense lawyer like Thomas Ice in with a factory like Ticktin. Our firm, like Ice Legal charges monthly. If we knock one out of the park and get somebody a free home (we have done it three times working on number four).. our retainer provides for a contingency bonus.. (usually $20,000) but to get it was not only need to get a dismissal with prejudice we have to file a new lawsuit for the client to quiet title. Only we get them the house free and clear are we entitled to the bonus. As I see it if we have a shot to get a dismissal with prejudice, but only by hopping on a plane to take a deposition, we can afford to do this for $500 a month if we have the potential for such bonuses. Thomas Ice takes half day depositions… when necessary to get the job done for his clients. If a lawyer’s fee is a one time fixed fee, or $500 a month it might be difficult to spend $1,600 of time (4 hours at $400 an hour) and $300 to $500 for a transcript to take a deposition
but lawyers like Thomas Ice can spend the money and time if the get a small portion of the benefit that comes form a contingency bonus for an exceptional result. That bonus when the amount is small not the shock the conscious high 40% charged by Tictin can align the lawyers interest with the clients and reward lawyers who go above and beyond to achieve a spectacular result.
Hi, Richard.
I’ve thought a lot about this since I posted this blog. Upon reflection, I agree that you and Ice shouldn’t be lumped in with Ticktin. If that’s how it came across, I apologize.
I respect the work that you and Ice are doing.
That said, I’ve handlled a LOT of foreclosure cases and I’m confident that $500/month is not necessary to defend foreclosure cases.
My firm has handled around 1,000 foreclosure cases. In my view, it doesn’t take $500/month to defend them, it just doesn’t.
(In fairness, it does seem the market for fees in Miami is higher than in my areas, so that is part of the disparity.)
Anyway, does that mean I think you and Ice aren’t doing $500 per month worth of work? No.
I tend to believe you are, particularly if you’re doing depositions.
(And that’s a big reason where you’re different from Ticktin, in my opinion.)
As you suggest, depositions are expensive, particularly if you’re paying/fronting the costs.
Respectfully, though, I wonder what that work accomplishes in the grand scheme.
Three dismissals with prejudice/quiet titles is great.
But out of how many cases?
That’s not meant to be critical, it’s really not.
Those three clients will love you for life, as they should.
It’s just that I have a handful of quiet titles in the works right now, without the $500/month.
I just don’t think $500/month is necessary, particularly when coupled with a four-figure retainer (and a contingent fee).
As I see it, by charging less, my firm appeals to many homeowners who would otherwise not be able to afford an attorney. And for me, that’s a huge part of the point.
Many people just can’t afford $500/month. Many of my clients tell me “If I could afford that, I wouldn’t be in foreclosure.”
My business model is predicated on “what do I really *need* to collect from each homeowner to adequately and competently represent them?”
I’m sure I could (and arguably should) charge more.
But I’d rather put my firm in a position to help as many people as possible, particularly those who cannot otherwise afford a lawyer.
You may argue you do a better job than me. In some respects, maybe you are. I don’t have any quiet titles (yet). But for most of my clients, that’s not even a goal.
Personally, I don’t think that is a reasonable goal for any particular person. From a numbers’ perspective, sure, if any lawyer has enough cases, some of them are going to result in quiet titles.
I just don’t think the chances of that are significant enough in any one particular case to justify extra charges.
As for the contingent aspects, I’m not arguing with the contingency if you get a quiet title. If you get a client a free house, a reward like that is reasonable.
My concern is with contingent fee contracts which call for a percentage even upon a dismissal without prejudice (or a dismissal with prejudice against the wrong entity).
I’ve probably gotten 20 dismissals without prejudice, maybe more. It doesn’t happen every day, but it happens often enough that I consider it just part of the job.
I don’t see that as a basis to get a contingent fee. Why should I pocket five figures when the client may well get sued again? That doesn’t seem fair.
It’s particularly not fair when you combine that contingent fee with $500/month and a four-figure retainer, as many lawyers are charging.
These are just my opinions. Reasonable people can disagree. This is just how I’ve chosen to do business.
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