85.7 F
San Fernando
Sunday, Aug 14, 2022
-Advertisement-

Profits Low, Demand High for Legal Aid Firm

Neighborhood Legal Services of Los Angeles County is a nonprofit law firm, but it faces the same challenge as its for-profit competitors: how to get paid for its services. The Glendale organization has offices in Pacoima and El Monte where a total of 40 staff attorneys work to help families. While its practices include employment law, family law and immigration, the largest portion of its work focuses on mortgages and foreclosure prevention. Funding for the firm comes from a patchwork of grants from government agencies and private foundations. A settlement reached last February between 49 states and the nation’s five largest banks provided $400 million for nonprofit consumer advocacy in California, but at the last minute Gov. Jerry Brown took $390 million to plug a hole in the state budget. That left organizations like Neighborhood Legal Services in the lurch, although NLS is still trying to get a sliver of the money. Demand for services is not a question. Yvonne Mariajimenez, deputy director at Neighborhood Legal Services, said that even if all 40 attorneys worked full-time on foreclosures, it still wouldn’t meet the need. “We’re still doing hand-to-hand combat with the banks, to get them what they need to do,” she said. “Because there is very little money to fund advocates like ours, homeowners have little access to advocates who can challenge the banks.” The typical client is from the Northeast San Fernando Valley or the Antelope Valley and is a Hispanic family that bought its first home during the bubble of 2004 to 2007. The family usually has multiple adult wage earners – including children, siblings or extended family members – who pooled money to buy their dream house. When the recession took away their employment, the family couldn’t make the mortgage. The nonprofit’s lawyers spend most of their time steering clients into government loan programs that can lower their payments or provide insurance. Mariajimenez said the large banks often don’t tell their customers about these programs because they prefer to sell their own loan mod packages at higher prices. “The banks are self-administering mortgage modification,” Mariajimenez said. “The one thing keeping us back from a strong recovery is that these (government) programs continue to be voluntary. The national banks have signed up to participate in federal programs, but the resources aren’t there to make sure it happens.” Anna Cuevas is a former paralegal who helps homeowners modify their mortgages and runs the blog AskALoan- ModGuru.com from her office in San Diego. She said nonprofit law firms such as NLS play an important role in the real estate market, but they aren’t for everyone. While people might prefer a nonprofit attorney based on the assumption that they have no financial motive to commit fraud, they suffer from limited resources and have no financial or other incentive to push aggressively for their clients. “The nonprofits don’t really pay attention to all the numbers,” Cuevas said. “For example, if a loan modification is declined, they might not look at all the ways to make it work. They won’t go the extra mile.” Slow forecast Mariajimenez believes the housing market is mending on a national level, but it doesn’t always trickle down to the individual homeowners. Many of the current home sales are foreclosures sold to investors who become absentee landlords, a system she feels promotes neglect of the properties. “We are a long way from stabilizing the housing market,” she said. “Earlier in the cycle, banks were not responsive and people felt they were sending their documentation into a black hole. Now they are moving forward with loan modifications, but they aren’t in (homeowners) best interest.” For Mariajimenez, the biggest reason for optimism is that the national mortgage settlement encourages lenders to reduce the principal of loans, a step they have rejected until recently. Under the settlement, the five largest banks are required to work off up to $17 billion through principal reduction and other types of loan modification relief nationwide. Cuevas, the loan modification consultant, said principal forbearance is similar to an interest-only loan that delays repayment of the principal. Forbearance is now becoming more acceptable to banks. “A year ago, the probability of approval was about 2 percent,” she said. “Today it’s about 80 percent.”

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-