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a not-for-profit national trade association of mortgage banking attorneys with headquarters in Orange, California. "The issue of adequate compensation is like an onion," she said. "There are layers and layers of issues concerning this including delays and additional work relative to regulatory oversight and the additional time needed to document file compliance." Hultman says the current fees in some cases were established five to seven years ago and do not adequately address the amount of work and level of complexity attorneys are now facing. "Historically, there have been no periodic fee increases to adjust for cost of living increases, consumer price indices, or other economic indicators that have been increasing law office management and operation expenses," she explained. Rich Nielson of Nielson & Sherry, PSC, a firm with offices in two Kentucky cities, has been providing legal services to the foreclosure industry for 20 years. Like Hultman, he feels the compensation rate for attorneys has not kept up with the demands and stringent regulations now required. "Presently, the Fannie Mae rate in Kentucky is $1,700 per foreclosure," Nielson explained. "However, in my calculations, just to stay even given inflation and increases in staff time, the fee should be somewhere between $2,500 and $3,000. That would not be an increase in net revenue to the firm, but would simply keep up with inflation, additional staffing costs, and other expenses." Structure Needs Restructuring Caren Castle has served the default servicing industry for 30 years. She's currently managing attorney at The Castle Law Group, LLC, which has offices in Arizona, Colorado, New Mexico, Nevada, Utah, and Wyoming. Castle explains that the current compensation structure is one in 40 which attorneys are paid for a part of the flat fee during the foreclosure process and the remainder when the process is completed, which may take years in some cases. "In the meantime," she said, "expenses are still accumulating for the law firms involved in these foreclosure procedures." Most attorneys agree that extended timelines for processing foreclosures are a major factor contributing to the need for higher fees. "Work performed by these law firms related to foreclosures is becoming much more complex and, as a result, takes much longer to complete," according to Hultman. "Law firms used to process a standard foreclosure in anywhere from three to six months, depending on state law and whether the state is a judicial or non-judicial state. Now foreclosure procedures are taking longer than ever, due to amended state statutes requiring mediations, overcrowded court dockets, new compliance laws and settlement agreement requirements, judicial delays, and regulations generating from the CFPB [Consumer Financial Protection Bureau] and Dodd-Frank." Hultman cited New York, a judicial state, where foreclosures now routinely take up to three years to complete. Nielson agrees that extended timelines are a large part of the compensation issue. "Back in 2003, the timeline in Kentucky was 150 days," he explained. "In the course of nine years, the time has almost tripled to 420 days. This is due not only to the large volume of foreclosures, but also to the additional scrutiny that all servicers and default attorneys are under these days." Another reason fee adjustments are needed is the increased demand for non-legal, non-revenueproducing services. Alt says in the wake of many new lending regulations, law firms are told they need to implement added security measures such as installing cameras at every entrance or upgrade privacy protections by purchasing spam and intrusion filters for office email, and "you must follow compliance to the letter." However, these things cost money and small law firms barely making a living can't fulfill such requirements, he explains. According to Alt, even large firms have said, "We can't do this business the way we're asked to do it for the fees we are being paid." Inundated with Audits Hultman notes that rigorous third-party vendor oversight and auditing is one of the new requirements imposed on servicers as a result of consent orders issued by the Office of the Comptroller of the Currency and the Federal Reserve. Mortgage default attorneys are included in this third-party vendor group, despite the fact they are regulated by state bar associations. The audit and compliance reviews cover IT systems, disaster recovery plans, privacy controls, training and retention of professional staff, operations management, and audit/controls of law firm vendors. Compliance with all these requirements entails a significant investment on the part of the law firm to meet and maintain rigorous standards. Nielson is quite familiar with these audits. He says his office has a team led by an attorney who is devoted full-time to compliance and auditing and has brought on additional staff simply to deal with document requests from servicers. "We've had to add additional staff to monitor [foreclosure] cases because of the time delays associated with all of them" stemming from new compliance and audit needs, he said. Castle's firm has also added new members to handle the requirements of servicers' compliance reviews and audits. "Law firms are required to produce policies and procedures that were not historically required," Castle said. This means either retooling or hiring and training more staff members who are not involved in processing foreclosures, thereby creating another additional cost. "We are now subject to 20 or more audits annually," Castle said. "Sometimes, I feel there is one every week, and the effort of preparing for those audits required us to hire additional staff." Weisserman says his firm has also had to bring on new staff members to comply with regulatory and audit requirements. "When a client comes in to audit us, we have an entire audit team to handle it. Unfortunately, staff members on this team are not processing foreclosures, so we are not making money on what they do," he added. "If we could bill for our audits and all the

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