One of the considerations in deciding whether you should hire a lawyer to help you fight your foreclosure is the cost. It’s essential to understand how legal fees work to make sure that you don’t end up paying more than you can afford.
Most foreclosure defense attorneys structure their fee agreements with homeowners in one of three ways:
• by charging the homeowner an hourly rate
• collecting a flat fee from the homeowner, or
• charging a monthly rate.
Before you pay money to a foreclosure lawyer, consider whether you should hire a foreclosure attorney in the first place. Some foreclosure defense attorneys charge an hourly rate for their services. The rate can range from around $100 per hour to several hundred dollars per hour. With this type of fee arrangement, the lawyer generally collects an initial retainer; an advance payment to the attorney before starting to work on your case of several thousand dollars. The retainer amount and hourly rate vary widely, depending on the attorney’s experience and the customary rates in the area.
Say you give your foreclosure defense attorney a $2,000 retainer. She charges $200 per hour. First, she reviews all of the documents in your case. Then, she prepares and files an answer and affirmative defenses to the foreclosure action. All of this takes five hours. The attorney also spends time preparing for and attending a foreclosure mediation with you. You’ll also get billed for the time it takes to make phone calls and emails related to your case. This work, too, adds up to five hours. The retainer is now gone, and the attorney hasn’t even attended any foreclosure hearings yet. Because the attorney must do more work, you’ll have to make further payments.
Pros and Cons
The benefit to this type of fee arrangement is you’ll only pay the attorney for the amount of time actually worked on your case. The downside is that while the attorney will probably be able to give you a likely range of what you’ll pay in total, you won’t get an exact price as far as what the total cost of the foreclosure defense will be—and hourly fees can add up quickly. The benefit to paying a flat fee is that you know ahead of time exactly what the total cost of your foreclosure defense will be. Whether it takes five months or two years to dismiss the foreclosure or for the lender to complete the process, you know that this is all you’ll pay. The downside is that not all foreclosure attorneys offer this option, and you’ll have to pay the fee upfront, which is difficult for many distressed homeowners.
Other Lawyers Charge a Monthly Rate
Some foreclosure attorneys charge an upfront retainer ranging from several hundred to several thousand dollars and then a monthly fee (like $500) for each month that the foreclosure is pending. In addition, attorneys have been known to charge an extra fee on top of this amount, called a “contingent fee,” if the case is dismissed due to the firm’s efforts.
Pros and Cons
The benefit of paying a monthly fee is that you know what your attorney will cost each month without variation. Also, the attorney has an incentive to keep you in the property for as long as possible (if that’s your goal). The downside is that you must pay this amount each month, even if little activity takes place in your case during that time. Foreclosure defense attorneys will also charge for costs, like mailing, travel expenses, and court costs, on top of their fee.
Beware of Unreasonable Foreclosure Defense Fees
When the financial crisis occurred, it became difficult for many people, including attorneys, to find work. As a result, many attorneys became foreclosure defense “experts” overnight marketing their services to homeowners in distress. In some cases, the fees that attorneys charge for services related to foreclosure aren’t reasonable. So you need to be careful and do your research when hiring an attorney to fight your foreclosure. Ultimately, when trying to decide if a foreclosure defense fee is reasonable, ask yourself whether the attorney is charging a fair amount considering the services provided or whether the lawyer is trying to get a windfall from your situation. One of the biggest concerns of people in need of the assistance of an attorney is how much it will cost. The type of fee arrangement that is available to a client will often have a lot to do with the type of legal issues you are bringing to your attorney. There are several common types of attorney fees and fee arrangements:
1. Consultation Fees: Some attorneys charge an upfront fee, usually on a flat rate basis, to meet with the attorney and determine whether he will be able to assist you with your legal issues. Many attorneys do not charge an initial consultation fee, but you will need to check in advance to make sure.
2. Contingency Fees: This is a favorite among personal injury and medical malpractice attorneys. The attorney’s fee is based on a percentage of the amount awarded in a judgment or negotiated in the settlement of the case, while if you lose the case, the lawyer does not get a fee. However, should you lose, you will still often be required to pay expenses, so read your representation agreement carefully. Contingency fee percentages vary, possibly even within the same case. A one-third fee (33 1/3%) is common. However, some jurisdictions and some lawyers adjust this rate depending on how far along the case progresses. For example, the rate may be lower if it settles before trial and higher if an appeal is required. Some courts may set a limit on the amount of a contingency fee a lawyer can receive. Many clients request this kind of fee arrangement, not understanding the business implications to the attorney. Contingency fee arrangements only work for attorneys if there is a large sum at stake in the lawsuit. If the case is relatively small, say under $50,000, the lawyer may actually end up on the losing end of the transaction given the amount of time and money s/he may have to invest in order to complete the suit. Also, attorneys may be prohibited from making contingency fee arrangements in certain kinds of cases, like child custody or criminal defense matters. Similarly, contingency fees are almost never available in typical business law settings.
3. Flat Fees: Some lawyers may charge a flat fee for certain types of legal matters. This is usually an option if the attorney handles large volumes of a particular kind of case, allowing the attorney to drive the cases through the use of forms and standardized practices. These are usually relatively simple cases like uncontested divorces, will preparations, tenant evictions, or mortgage foreclosures.
4. Hourly Rate: This is the most typical type of attorney fee arrangement. The lawyer charges a per hour rate, and usually tracks his or her time in fractions of an hour (often 10ths of an hour / 6 minute increments). Some attorneys may charge different rates for different types of cases, so a contract preparation may be $100/hour while litigation may be $200/hour. Additionally, the attorney will also probably charge for certain paralegal fees, usually at a lesser rate than attorney fees.
5. Retainer Fees: This is not technically a separate fee, but more of a deposit paid toward the total cost of legal services to ensure that the attorney will be paid. The lawyer is paid a set fee, often based on the lawyer’s hourly rate multiplied by a certain number of hours. The retainer is usually placed in a trust account and the cost of services is deducted from that account as they accrue. Many retainer fees are non-refundable, but this can be invalidated if the fee is deemed unreasonable by a court. Many attorneys use retainer fees as a means of putting that lawyer “on call” to handle a client’s legal problems whenever they may arise.
6. Statutory Fee: In some jurisdictions, a statute or regulation may set the amount an attorney can charge for a particular service. Examples include probate and bankruptcy cases. Regardless of the fee arrangement, attorney fees are normally required to be set forth in a written fee agreement. You should read such an agreement carefully, and not be afraid to ask for clarification if the terms seem confusing or conflicting. Often, costs, such as postage, copies, expert and deposition fees, and others are not included in attorney fees, so be sure to determine how these will be handled and try to get an understanding of just how much this could amount to in the course of your case.
What Does A Foreclosure Defense Attorney Do For You?
Foreclosure cases are rarely set in stone. Hiring an experienced foreclosure defense attorney early in the case gives you the best chance of success. The last thing you want to do is battle for your home in court without knowing all your options. Here are a few immensely helpful things a foreclosure attorney can do for you.
1. Provide You With Options: A foreclosure defense attorney knows the legal landscape better than you. Their experience and judgment will save you time, help you avoid pitfalls, and maximize your chances of saving your home. Depending on your situation, your best course of action may be to avoid foreclosure via loss mitigation, modify your loan, file for Chapter 13 bankruptcy, or have your foreclosure attorney represent you in court outright. An experienced foreclosure attorney in Los Angeles can help you understand the pros and cons of each option.
2. Represent You At Settlement Conferences: If you live in a state that mandates settlement conferences, your attorney can attend them in your place and negotiate with the bank’s attorney to save your home. The conference is an opportunity for both parties to reach an alternate resolution that doesn’t involve foreclosure. Without an attorney, you’d have to contend with the bank’s attorney on your own time with limited knowledge.
3. Help You Get A Loan Modification: A loan modification adjusts the terms of your loan such that you can afford the payments. While modifying a loan is free, few homeowners can convince the bank to approve a modified loan without help from an attorney. The bank must review several key pieces of information about your income before making their decision. An experienced attorney can provide and present this information in the best light to help you get approved for a new loan you can afford.
4. Help You Pursue Loss Mitigation: Certain loans carry loss mitigation options that give you an opportunity to stay current on your payments. Some lenders may withhold this option from you, and without an attorney you would likely have no idea that you could pursue this route. An attorney will not only let you know if loss mitigation is available to you, but also help you choose between the many different ways you can approach this option.
5. Raise Defenses In Court: If the bank made mistakes in foreclosing your home, an attorney can identify them and fire back. For example, the lender may have breached your loan contract or violated state foreclosure laws, or the foreclosing party may not be the rightful owner of the mortgage debt. You may unknowingly be the victim of unfair lending practices or an unlawful mortgage assignment. There are dozens of strategies and tactics an experienced attorney can use to postpone foreclosure. And if the court accepts your attorney’s argument, you may receive the option of a settlement or even have your lawsuit dismissed entirely.
6. Help You File For Chapter 13 Bankruptcy: If all else fails, an attorney can help you file for Chapter 13 bankruptcy. If approved, you will have three to five years to get up to date on your payments and will be able to keep your home.
When to Hire a Foreclosure Attorney?
Your lender usually has to wait until you’re at least 120 days late on your payment to initiate either a judicial or nonjudicial foreclosure, depending on state laws. In a judicial foreclosure, you respond to the lender’s lawsuit through the state court system. To fight a nonjudicial foreclosure, which doesn’t require the lender to secure a judge’s approval, you have to file your own lawsuit for the court’s consideration. In either process, you should usually seek out an attorney for some situations in particular, such as when:
• You think you have a valid defense. A foreclosure attorney can determine whether the lender followed proper practices, made any mistakes with your account or has the legal standing to foreclose on you. If an attorney is able to find a valid issue with your foreclosure, it could turn the legal tide in your favor.
• Your legal options are limited, but you want to keep your home. Even if it’s unlikely you’ll be able to mount a legal defense, an attorney can help you keep your home by aiding in negotiations with your lender. If you expect a foreclosure, it’s best to get legal advice as soon as possible.
• You have a government-backed loan. For example, a loan backed by the Federal Housing Administration (FHA) might qualify for additional aid, so you’ll want to ask an attorney for guidance.
• You’ve served in the military. Military members, past and present, can meet with a lawyer to discuss possible protection against foreclosure under the Service members Civil Relief Act (SCRA).
• There are pandemic-related complications. Local and federal governments continue to implement and update foreclosure laws. Depending on the terms of your mortgage and where you live, you may even be subject to a temporary foreclosure moratorium that protects you from losing your home for the time being. You may also have a right to request “forbearance,” meaning a pause in your payments, or other relief options. An attorney will know which current regulations can apply to your situation, and what the best option might be. On the other hand, some foreclosures can be handled with little or no help from a lawyer:
• You don’t want to keep your home. You may already be looking for more affordable housing or requesting a loan modification (more on that later), so an attorney may not be necessary—but you’ll still be in charge of handling any court-required legal documents if you’re facing a judicial foreclosure.
• You don’t have a defense for your case. A lawyer should be able to tell if you have a potential defense during an initial consultation. If you have no grounds to fight the foreclosure, you can likely manage the rest of the process without a lawyer.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
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