Posted on Friday, January 21, 2011
A condominium association in Weston is seeking monetary sanctions against the Law Offices of David J. Stern, which it claims filed "fraudulent" court documents that led to two simultaneous foreclosures being filed on the same unit.
The foreclosures brought on behalf of two lenders claiming to own the same mortgage have tied the unit up in court for three years and cost the association thousands of dollars in unpaid maintenance fees, Hollywood attorney Eric Glazer said.
His firm, Glazer & Associates, represents the Townhouse Village at Bonaventure 40 East Condominium Association.
The Plantation law firm claimed it no longer represents one of the lenders, Aurora Loan Services.
Broward Circuit Judge David Krathen, who last month consolidated both foreclosure cases, rejected the Stern firm's motion to withdraw from the Aurora case.
Krathen said he will conduct a hearing to determine if the law firm and three of its lawyers should be sanctioned.
If the firm had been allowed to quit the case, the condo association would not have been able to seek sanctions to compensate for the delinquent fees, Glazer said.
"It is virtually unheard of for a judge to not let a lawyer out of a case, especially when the law firm was fired by the client," Glazer said.
Numerous loan servicers and lenders, including one of the companies involved in the Townhouse Village case, have stopped using the Stern law firm, once one of the busiest foreclosure operations in the state. The Florida attorney general is probing the firm and three other Florida firms amid allegations that they fabricated evidence, backdated documents and forged signatures to foreclose on houses.
Glazer said the Stern firm committed fraud when it filed one foreclosure suit on behalf of Deutsche Bank, as trustee, in 2007, and another action on behalf of Aurora in 2008. In each case, a Stern employee signed an affidavit attesting that the lender owned the loan and had the right to foreclose.
"The fraud was so blatant," said Glazer & Associates attorney Kristy Phillips, who last month asked Krathen to sanction the firm and its employees.
An Aurora spokeswoman could not be reached for comment. Deutsche Bank did not respond to requests for comment.
Miami attorney Jeffrey Tew, who represents Stern's law firm, declined to comment.
The two foreclosures have kept the Townhouse Village unit in limbo for nearly three years and the condo dues have not been paid in that time. Phillips declined to say how much is owed. A representative of the condo association did not return a phone call.
"[The alleged fraud] has resulted in financial hardship to my client and all the members of the association who are actually paying their assessments," Phillips said.
The association is also going after the Stern firm's office manager, Cheryl Samons, who signed the affidavits attesting ownership of the notes, and the Stern lawyers involved in both cases, Matthew Kahl, Misty Barnes and Karina Musella.
Lenders usually sell home mortgages to companies that put the loans into investment pools. Some loans have been sold multiple times. Over time, lenders and servicers often lose the original note, making it difficult to prove who actually owns the mortgage. Industry critics say lenders and foreclosure processors will sign the affidavits that claim they own the note even though they don't have any documentary proof.
"What the judge is saying is, 'Wait a minute, we are not so much concerned about the bank's conduct but the law firm's conduct,'??" Glazer said.
The three attorneys did not return calls seeking comment.
Lenders, not their lawyers, usually are the target of sanctions over alleged foreclosure fraud, foreclosure attorney Tom Ice said.
Ice defends delinquent homeowners who have been sued by lenders represented by Stern's firm. He said he prefers to go after the bank if he thinks files have been improperly handled.
"We have moved for sanctions against the bank for Stern's misdeeds because … the bank is responsible for the actions of its agent. There is greater value for our client to pursue sanctions against the bank for Stern's conduct," Ice said.
If a lender is hit with sanctions, it can go after Stern for malpractice, said Ice, founder of Ice Legal in Royal Palm Beach.
At the evidentiary hearing, Krathen will weigh sanctioning the firm and its lawyers. He will also decide whether to set aside the final judgments on both foreclosures actions. The judgments allowed both lenders to proceed with foreclosure auctions. The auctions have been repeatedly postponed.
Glazer said the case underscores a national controversy over "robo-signers," those lender and law firm employees who sign thousands of foreclosure documents attesting to their accuracy without verifying the information.
The robo-signer scandal emerged in September and forced some big lenders to temporarily suspend foreclosures while they examined their procedures.
Miami attorney I. Barry Blaxberg, who represents condo associations, said the scandal and investigations have made foreclosure firms an easy target for homeowners and associations seeking sanctions.
"They are riding the coattails of the popular belief that there has been wrongdoing by a number of foreclosure firms," said Blaxberg, a partner with Blaxberg Grayson & Kukoff. "And probably they are correct based on the ongoing federal and state investigations."
The Stern law firm uses DJSP Enterprises, a public company that was spun off from the firm in 2009, to process foreclosure files.
DJSP and the law firm have been battered by the robo-signer controversy. Since September, the company and the firm have lost at least 70 percent of their clients, including Fannie Mae, Freddie Mac, Aurora and Bank of America. Layoffs have shrunk the combined work force of the two operations, which share many employees, from about 1,200 workers in mid-2010 to less than 300 in December.
Glazer said seeking sanctions against law firms with questionable foreclosure practices may be a new remedy for associations waiting for a delinquent unit to be foreclosed and sold.
The 3rd District Court of Appeal ruled in 2009 that lenders are not responsible for paying condo fees until they take title to foreclosed units.
Now that strategy "is morphing into a different direction — to blame the attorneys from the so-called foreclosure mills for [apparent] improper conduct and pursue monetary sanctions," Blaxberg said.
Miami attorney Roger Slade, a Pathman Lewis partner, said sanctions are typically awarded against individual lawyers. But the court could decide to sanction the law firm itself.
"The level of the penalty is going to depend, in part, on the level of bad faith which is exhibited by the party," he said. "At a hearing, the court will determine whether it was just negligent or whether it was something that was done on purpose to defraud the court."
Slade said a judge could also ask the Florida Bar to investigate whether a lawyer committed fraud upon the court. In October, the Bar created a foreclosure fraud division for that purpose. Last year, 20 cases against 15 lawyers were investigated and closed. The probes didn't result in any disciplinary measures, according to Florida Bar spokeswoman Francine Walker,
As of Jan. 10, there were 67 pending investigations of 43 Florida lawyers, including David J. Stern.
Paola Iuspa-Abbott, DAILY BUSINESS REVIEW