Go Back, Says Mortgage Law Expert


Pamela Simmons is one of the towering figures in the field of mortgage law, Truth in Lending and the mortgage meltdown.

She and her partner Bill Purdy are my go-to lawyers for anything related to mortgage loans gone bad.

I count her a friend as well.

Below is an open letter she wrote to attorneys struggling to help clients whose homes were at risk.

As you read it, consider the application of her advice to the practice of bankruptcy law.   We face the same complexities of law, facts, and the economy in our practices.

The caution to gird your loins for some prolonged study and to put your client’s interest first  applies in bankruptcy law, too.


The mortgage meltdown has caused people in this state a lot of pain.

Whether it is the loss of equity due to devaluation of the real estate market, the
subsequent effects of restrictive loan practices, the loss of our 40 1k values or
the employment downturn, no one in this state seems immune.

It is clear that the property owner looking at losing their home has been hit the hardest.

California attorneys, both caring and suffering from their own downturn in
business, has flocked to assist the homeowners. This letter is directed to them.

Beware. Danger is ahead. I’d go back if I were you.

Please know that there is a lot of studying ahead if you decide to go on.

The laws surrounding mortgage lending in the residential property arena
are vast, complex and sometimes downright unfathomable.

They are based upon the foundation of real estate secured transaction law, but then take a sharp turn into the area of consumer laws and are liberally sprinkled with banking regulations, rules promulgated by the Federal Reserve Board and issues of preemption.

They are a peculiar mix of state and federal law.

The state anti-deficiency statutes, case law regarding equitable mortgages, and the federal Garn-St. Germain Act all playa role, and don’t even get me started on the tax issues.
Learning and understanding the interaction of all of these areas of law is
not an easy job. I guarantee you did not learn this in law school, no matter
where you went.

Worse yet, there are relatively few attorneys with knowledge in
this area who are available to mentor the attorney wishing to learn this area of
law. There are many books and practice guides for those attorneys, but you
should expect a very long read.

The National Consumer Law Center’s Truth in Lending, a book I consider the bible on TILA related matters, is 1054 pages long. However, even this wonderful book won’t help you to understand the escrow process or what fees are generally considered finance charges and why.

Learning how to read a HUD-1 is one thing. Figuring out a
lender’s payment history is something else altogether. I know many a
bankruptcy attorney who still can’t figure out those bad boys.

By the way, do you love math?

Can you articulate why yield spread premiums are so heinous? Will you be able to explain to the judge how the interest owed on this loan was one amount, but the amount due as a monthly payment was an altogether different figure and why it was not unexpected that the borrower was completely baffled by this loan product?

What do you know and understand about the UCC?

Do you know why “where’s the note” in at least part, is not about a lost note, but instead is about standing?

How is your understanding of bankruptcy court procedures and no, you cannot count on what the lender says to you about postponing the foreclosure sale. Get it in writing.
Let’s talk a little about the “loan auditor”.

Do you understand why hiring a so-called “loan auditor” is not a substitute for
knowing and understanding the law?

How can you think that you can rely on an expert to explain what the law is? They are not experts in the law – you are.
The proper use of experts is in explaining unusual FACTS to the jury or the
judge. Experts can properly be used to explain about brain surgery, but not
about the law of medical malpractice.

You are the lawyer. Know the law or go home.

I speak with attorneys every week who have undertaken to bring litigation on behalf of homeowners to try to stop a foreclosure. These attorneys are (properly) appalled at the loan that the homeowner has and the behavior of
the lender in telling them they can obtain a loan modification on one hand, but
filing a Notice of Default with the other hand.

These well-meaning attorneys want nothing more than to help (while earning a fair fee).

Nothing would be better than having boatload of such attorneys out there fighting the good fight except perhaps having a boatload of attorneys who know what they are doing out there fighting the good fight.
The effect of all of this is not unexpected – though perhaps a bit stunning in its
depth and scope.

Judges are starting to treat such cases with disdain.

Lenders are beginning not to take attorneys seriously when they write or call; they actually have lists of attorneys they routinely ignore.

Bad case law is starting to develop.

The public is starting to look to attorneys with suspicion. The State Bar itself has taken the unusual step of publicly listing attorneys who are under investigation before the investigations are completed.

Those who seek to represent homeowners in mortgage-related matters,
but lack the experience to do so, beware.

The complexity of the issues creates ample opportunity for error and a bad result for the client.

Ask yourself the hard question: Am I competent to represent this homeowner?

If not, just say no. At a minimum, seek co-counsel with appropriate experience and expertise to consult with on these highly complex matters.

The risk reward to both you and the client must be taken into consideration, with the interest of the client


  1. What she says is true. There are few among us competent enough to encourage clients to take on those “too big to fail”. And bad cases really will make bad law. Frustrated in part by such conditions I moved from practice of law into to residential real. And after more years and experience with transactions, I now find my litigation experience useful in helping clients move forward to recovering from damage they cannot avoid. Sometimes the best thing we can do is to reassure them that there is life after foreclosure and bankruptcy, to cut the losses and move on.

    I am here to tell you from personal experience that it is possible to help our clients salvage their dignity and family peace by encouraging workable alternatives to suffering foreclosure, even a short sale, and even while in a bankruptcy chapter proceeding.  It is not easy, and most agents won’t know how to manage it yet without help from the attorney. Real estate professionals and attorneys will need to work together for the best interest of the client. Realtors can help attorneys and attorneys can help realtors do this work of recovery.

    We are all learning from this devastation. We should do our best not to make it worse.

    Barry Mangan, JD, GRI, CDPE
    Realty World Land of Liberty

  2. While I concur that a foreclosure is not the end of life as we know it, the consumer needs legal advocates to challenge illegality and exploitation.

    I am horribly mindful of the reality that if the less than capable tackle these issues, the results are not optimal.

    What do we say to a client with a mortgage problem?  Yes, you have a case but there isn’t a lawyer around who has both the skill and the bandwidth to take you on?

    It’s an extremely painful situation.

    In the bankruptcy field, there’s far more mentoring help available, if the inexperienced become mindful of what they don’t know, and ask for help before the damage is done.