Q & A With Business Law Group

Q&A
With
Bruce Rodgers, Esq.
Business Law Group, P.A.
By
Jon Dickson

1. How long have you represented LM Funding?

Frank Silcox and I have done large transactional work together for about 15 years. Mostly we have raised large private equity funds and financed multi-housing construction and bought and sold distressed notes and mortgages. We still do. We were in Miami on my boat on the way home from the Bahamas in the summer of 2007. The number of cranes in the sky told us we shouldn't build any more condos and that we needed to think of something to do with our equity partners' money. With Frank's tax lien background, we realized the opportunity the law afforded condo associations and that set in motion organizing LM Funding. That's a long answer for saying I've been with LM Funding before the beginning.

2. Are you an owner of LM Funding or does LM Funding own Business Law Group?

Neither. The law firm and LM Funding work closely together but are separate entities. I own the Business Law Group and Frank and others own LM Funding. I religiously send him a bill every month.

3. When you file liens and foreclosures, are you filing on behalf of LM Funding or the associations?

All collection action is taken by Business Law Group as attorney for the associations. LM Funding does not participate in collection efforts at all. All money collected is deposited in Business Law Group's trust account and then distributed to the association and LM Funding per the terms of their Purchase Agreement.

4. What steps do you take to minimize an association's exposure to Fair Debt Credit Practices Act and other similar statutory claims?

Business Law Group acts just like any other reputable firm in the collection business. We spend a lot of time checking and re-checking our communications for compliance. I probably take it a little further than most in that I will not allow anyone from the firm to communicate with a debtor other than in writing.

5. How do you respond to the view espoused by some attorneys that an association cannot assign its collection proceeds?

I don't think this is an informed position so I always first ask for some legal authority on this point. There simply isn't any. In fact, banks and insurance companies have taken a security interest in association accounts for years. A couple articles supporting the ability of an association to assign collection proceeds are , "Financial Management of Condominium and Homeowners Associations," published jointly by the Urban Land Institute and the Community Association Institute (CAI) and by Richard Dugans, Esq. in The Journal of Commercial Bank Lending and in "Lending to Different Industries," Volume 2, Second Edition.

6. What is the single biggest reason associations choose not to do LM Funding's deal?

The deal is a true win-win and if anyone comes up with a scenario where it isn't then we simply change the deal to make it so. Sometimes associations have the Purchase Agreement reviewed by their collections attorney who has an inherent conflict because he loses business if the association goes with LM Funding. That's when I hear crazy arguments like the last question.  Boaards really need to be careful not to take action upon the advice of an attorney that they know has a conflict.

7. How much are your fees?

Like most firms collecting delinquent assessments, we bill a fixed amount per file at each stage. Fee statements appear in all foreclosure files so determining what judges have approved as "market" isn't too hard. I think we're slightly below average. My fees are a non-issue to the associations since LM Funding pays them and I have to have approval from the association to accept anything less than a full payoff. It's high volume low priced work. I sort of miss making $450 an hour like I did at Foley & Lardner but that's the only part I miss.

8. One blog criticized your firm for never filing foreclosure actions, is that your practice?

Where there's equity in a property, we always file foreclosures especially when banks are holding title and not paying assessments. We run a spread sheet on every account to determine if a foreclosure can produce a full payoff. The depressed state of the market and lack of equity in these properties makes foreclosure a risky proposition in a lot of cases. So we try to find alternatives. I think my CAI article on this point is somewhere on the site.  That said, about 10% of LM Funding accounts are in association lien foreclosure procedings at all times and sometimes we just have to foreclose because an owner is being recalcitrant and needs that extra push.

9. What has surprised you the most about the world of collecting association delinquent assessments?

We take over a lot of collection files in various stages of the process. I'm disappointed to see how many collection attorneys seem to run the files in their best interests rather than the associations'. The standard operating procedure is to send a 30 day letter, file a lien, and send notice to foreclose. They typically bill $300-$500 for this simple forms work. Next they ask the association if it wants to foreclose and to send $1,000 or more cost and fee retainer. They rarely offer any financial analysis as to whether a foreclosure will produce a full payoff. If the association declines, the attorney just sits back and waits for the lien to get paid.  I had one attorney tell me that his goal was to bill up to the 6 months of assessments on each file so that when a foreclosure paid off he got all of the money.

The last thing that bothers me is the plain vanilla responses to bank foreclosures. There's a lot of money at stake in these bank foreclosures and it doesn't take too much effort to at least make the bank jump through all of the statutory hoops to obtain the 6 month or 1% relief.

Our approach to the collection process is the same as everyone else's until the lien is filed. After that, we use LM Funding's additional capital and do some different things.
We always answer and defend bank foreclosures. The foreclosing bank often doesn't even own the mortgage when it files. There are numerous other defects in these actions that need to be used to try and get the association a full payoff. You just have to try and too many lawyers don't.

10. How do bank attorney's respond to your aggressive representation?

Sadly, I wish they would be more responsive. I make settlement offers and offers to purchase their foreclosure position on every case and they often do not respond at all. I am pretty sure when a defendant makes an offer of settlement some bar rule requires presenting it to the client and as a general courtesy responding to the other party. I realize these bank foreclosure shops are based on high volume but by ignoring my offers to settle or to buy their mortgage position, they are doing their client a disservice. From our experiences buying large distressed commercial paper, a bank has a walk away price on every distressed loan. They like nothing better than to realize that price with the least amount of costs. If we can get to the decision maker at the bank, we can usually cut that deal which in turn gets a warm assessment paying body into a property more quickly which is what the association wants.

11. When LM Funding buys a mortgage foreclosure position ahead of the association's lien position, isn't there a conflict?

No doubt facially a conflict exists in this situation.  Like any lawyer with a conflict, I have to notify both parties and offer to withdraw which I do.  LM Funding has inside counsel and associations have their regular counsel so they can decide how to proceed.  However, as with most conflicts, parties can agree to terms and waive the conflict. In this case LM Funding would consolidate title to the property either through the lien foreclosure or the mortgage foreclosure. The property is then rented or sold and the proceeds are distributed pursuant to the Purchase Agreement in the same manner as if the original owner had paid assessments in full except that LM Funding may get a windfall for its efforts if the proceeds exceed amounts owed to the association. So as with all points of the LM Funding - Association relationship, the association comes out ahead of where it would have been without LM Funding's help. That's how Frank and I started this in what seems like forever ago on that boat in Miami.