From Annual Conference . . . to Major Litigation

At the 2010 Pro Bono Institute Annual Conference, we were pleased to highlight a then month-old, cutting-edge initiative of The Lawyers’ Committee for Civil Rights Under Law, the Loan Modification Scam Prevention Network (LMSPN).  Millions of distressed homeowners are vulnerable targets to devious and sometimes criminal third-party scammers and con artists.  Underwater homeowners, desperate to keep their homes, are at risk from so-called “loan modification specialists,” some of whom are the very people who previously peddled subprime loans.  They employ various scams with disastrous consequences for homeowners.  While waiting for the promised relief, homeowners not only lose their money but often fall deeper into default and lose valuable time.  These scammers are highly mobile and easily able to move from one community to another.  In addition, resources both at the governmental level in prosecuting scammers and legal aid organizations in assisting or representing individual homeowners are stretched thin.

The LMSPN was created, in partnership with Fannie Mae, Freddie Mac, and others, to strengthen the fight against scammers and support existing law enforcement efforts at the national, state, and local levels.  As part of this initiative, with the help of pro bono assistance, the Lawyers’ Committee has created a database to document scams, which, since its inception just two years ago, has logged more than 21,000 complaints from homeowners nationwide, representing more than $60 million lost to such scams.

Recently, the Lawyers’ Committee, the Washington Lawyers’ Committee for Civil Rights and Urban Affairs, and K&L Gates LLP*† filed the sixth lawsuit as part of the LMSPN, and one of the first cases filed in federal court to allege a violation of the Fair Housing Act based on a mortgage assistance scam.  The lawsuit was filed on behalf of a Woodbridge, Va. couple who had been victimized by scammers that allegedly prey on vulnerable Hispanic homeowners for whom English is a second language.  The complaint alleges that the couple was induced to hand over the title to their home for no money and to enter into a “lease agreement” whereby they would pay thousands of dollars to “rent” their home while a purchase of the mortgage was arranged.  As a result of the scam, the couple has defaulted on their primary mortgage, subjecting them to a risk of foreclosure and damage to their credit.  The complaint alleges that the targeting of Hispanics violates the anti-discrimination provisions of the Fair Housing Act.  Moreover, law enforcement officials in Colorado recently initiated an enforcement action against the same scammer for similar operations throughout the country.

K&L Gates joins a number of firms who have gotten involved with the LMSPN and have done tremendous pro bono work on behalf of eligible loan modification scam victims. Working to stop unscrupulous scammers is a meaningful way for law firms to make a significant pro bono contribution without running afoul of ethical concerns about conflicts of interest.  Unlike foreclosure or load modification work, loan scam projects do not address the underlying mortgage and, as a result, a great majority of major law firms should not have a conflict.

Have you done pro bono work as part of the LMSPN or other projects related to the housing crisis?  Leave a comment and tell us about your experience.

* denotes a Signatory to the Law Firm Pro Bono Challenge®
† denotes a Member of the Law Firm Pro Bono Project