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Bar News - June 18, 2010

S.A.F.E. Act in NH: Chronology

July 30, 2008 – National S.A.F.E. Mortgage Licensing Act signed into law.

"The S.A.F.E. Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators…"

A model state act is also disseminated to states for guidance.

April 1, 2009 – Amendments to RSA 397-A become effective, requiring state licensing for all mortgage originators as defined by the new statute.

March 5, 2010 – ABA submits a comment to US Department of Housing and Urban Development urging that proposed rules to implement the S.A.F.E. Act be amended to broaden the exemptions for attorneys. "By granting HUD and the state agencies sweeping powers to regulate these lawyers [referring to lawyers whose primary task in representing clients is assisting them in loan-modification], the lawyers’ employees and agents, and the legal services they provide clients, they Proposed Rule could erode the confidential relationship between lawyers and their clients, including the attorney-client privilege and therefore could undermine the client’s right to effective counsel."

March 29, 2010 – ABA submits comments to Federal Trade Commission regarding proposed rules on Mortgage Assistance Relief Services rules, regulations aimed at protecting consumers from fraudulent foreclosure rescue and mortgage modification services. The rule would forbid companies providing mortgage modification services from charging up-front for these services. Instead, companies could only collect payment after providing services. The ABA "urge[d] the FTC to broaden the [attorney] exemption to cover all aspects of the attorneys’ legal representation of clients in connection with mortgage assistance relief services, not just those provided in connection with the filing of a bankruptcy, court or administrative proceeding. After all, one of the principal goals of securing legal representation is to avoid bankruptcy and litigation if possible, not encourage them."

April 1, 2010 – Banking Department issues cease-and-desist order on Dargon Law Firm, P.L.L.C, alleging violations of RSA 397-A and ordering that the firm immediately halt all mortgage-modification work and refund any fees paid to clients for such work. The petition also threatens more than $60 million in fines for alleged violations. The Banking Department stated that it had acted on a complaint in moving against Dargon.

The Department later disclosed that a Department employee had received a mailing from Dargon law offering its services to assist with foreclosure prevention. In newspaper coverage, Dargon acknowledged sending mailings to lists of consumers past due on their mortgages obtained from consumer credit agencies.

April 5, 2010 – Attorney Dargon obtains temporary ex parte relief from the cease-and-desist order until a preliminary hearing is held in superior court.

April 5, 2010 – National Association of Attorneys General (NAAG) issues comment to the Federal Trade Commission on a measure to regulate third-party mortgage rescue consultants. The NAAG asserts that "It is crucial that the rule not contain a broad, status-based exemption that categorically excludes attorneys from its coverage.

April 12, 2010 – Hearing is held in Merrimack County Superior Court.

April 26, 2010 – Merrimack County Superior Court Judge Larry Smukler issues five-page order granting petitioner Dargon’s request for an injunction, in part, "during the pendency of the department’s administrative process." Judge Smukler granted the injunction as it pertained to the majority of Dargon’s clients who were subject to foreclosure or where a foreclosure action was "likely" due to missed mortgage payments.

In the small number of cases where a foreclosure was not "likely," Smukler ordered that Dargon cease representation with those clients. Further, he ordered that Dargon comply with the department’s request for disclosure of client records with several limitations for the purposes of "developing an evidentiary record" for the administrative process.

April 27, 2010 – The Banking Department seeks access to client files at Dargon’s office and is turned away without being provided access to client files.

April 28, 2010 – Commissioner and Dargon separately file motions for clarification of the order, disagreeing over which records can be turned over, and for what purpose.

April 29, 2010 – Commissioner files response to Dargon’s clarification motion, and asserts the Department’s right to inspect "all client files for any loan-modification negotiations or re-negotiations" performed by Dargon’s firm.

April 4, 2010 – Attorney Dargon files complaint against the Banking Department, and announces that, due to the 4/29 filing by the Banking Department that, he said, pre-supposes that Dargon’s firm’s activities fall within the jurisdiction of the department, that it will be fruitless to pursue an internal administrative process in the Banking Department.

May 25, 2010 – Banking Department officials are peppered with questions at an NHBA CLE program on current enforcement of the state SAFE Act.

June 8, 2010 – Members of the Real Property Law Section, at the request of the Board of Governors, discuss potential courses of action regarding attorneys’ concerns about the enforcement of the state S.A.F.E. Act in NH.

June 30, 2010 – A hearing is scheduled in Superior Court to determine whether attorney Dargon will be held in contempt for allegedly not complying with providing client records as stated in the April 26 decision.

If you are in doubt about the status of any meeting, please call the Bar Center at 603-224-6942 before you head out.

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