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» VISIT US ONLINE @ DSNEWS.COM INDUSTRY INSIGHT INDUSTRY INSIGHT MARKET PULSE BEST PRACTICES COMPENSATION CONVERSATION By Sandra Lane Earnings Fall Flat "Traditionally, default processing has been paid on a flat fee basis, but does that make sense anymore?" Weisserman asked. "What a default processing law firm does today is not what they were doing five years ago." He explains that now attorneys are required to process foreclosures in different steps and comply with many new regulations. This means that it takes longer to process a foreclosure than it previously did, resulting in higher costs to complete the legal process. "It's not a question about the fee, but about what you're supposed to do for that fee," commented Jerry Alt, president of the LOGS Network, an organization that provides legal solutions for the residential mortgage and consumer credit industry with headquarters in Bannockburn, Illinois. Alt is an attorney and a 30-year veteran of providing legal services to the industry. "The thing to consider is that a good number of the activities a foreclosure law firm today is asked to perform were never contemplated in the definition of a flat fee," Alt said. "You're not asking us to do the same thing, so why are you asking us to accept the same amount of money?" Alt says this should be the question on every lawyer's mind. As an example, Alt gives this allegory: "I would like you to paint my dog house, which will require a quart of paint." You say, "OK," but then you are asked to paint the owner's entire house— not just his dog house. The owner's rationale is that, "You're going to get the paint, and you're painting anyway, so why not paint my entire house as well as the dog house?" Alt suggests a better way to approach the issue would be to determine if a particular law firm is capable of meeting the various requirements, and then assign a fee. "The point is that the fee for a routine foreclosure these days is grossly inappropriate given the additional services the law firm is expected to provide," he said. Another observation comes from Alberta Hultman, executive director and CEO of USFN, POINT— COUNTERPOINT Jeff Weisserman, general counsel at Trott & Trott, P.C., in Farmington Hills, Michigan, believes recent changes in the landscape of legal work performed within the default servicing industry have brought two issues concerning compensation to the forefront. One is the question of whether law firms are being paid adequately for the work they perform, and the second concerns the method on which payment is based. GROUND FORCES O ne of the most sensitive areas in the default servicing industry today is that of compensation for law firms that process foreclosures. Due to increased timelines, more stringent regulations, requirements for additional staff, and the necessity of establishing security procedures for confidential information, costs have increased dramatically for law firms. However, little has been done to increase the amount of fees paid to these attorneys, resulting in the demise of a few law firms and financial hardships for others. Yet, there is reluctance on the part of most law firms to discuss the need for fee increases. This issue has become the elephant in the room. 39

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