Law Suits & Courts

Florida AG v. Robo Signers

Posted on Tuesday, October 12, 2010

Florida Attorney General Bill McCollum has joined top regulators from 39 other states in scrutinizng the banks, mortgage companies and loan servicers involved in the widening foreclosure crisis.

But McCollum stopped short of calling for some or all lenders to temporarily halt to foreclosures, short sales or evictions — something attorneys general in Massachusettes, Texas and some other states have done within the past week.

"While this is no doubt a serious matter, there still exist valid foreclosures that need not be delayed," said Ryan Wiggins, McCollum's spokeswoman.
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Iowa Attorney General Tom Miller, who is leading the State Foreclosure Prevention Working Group that Florida joined, last week asked that foreclosures by three major lenders be stalled in that state: the GMAC Mortgage unit of Ally Financial, Bank of America, and JPMorgan Chase.

Chase and GMAC have stopped evictions and some foreclosures in Florida and 22 states where courts supervise foreclosures, to doublecheck for potentially faulty paperwork and document reviews. Bank of America last week became the first lender to extend its review to all 50 states.

Wiggins said rather than a blanket moratorium, McCollum's office will look on its own, and with the working group, at "available options." While banks are federally regulated, Wiggins said the states would have jurisdiction over mortgage servicers.

Wall Street and the White House also gave a thumbs down Monday to a total freeze on foreclosures nationwide, saying clearing up faulty paperwork could take as little as two weeks.

A complete halt would be "catastrophic" for the U.S. economy and hurt home sales, according to a statement from Tim Ryan, president of the Securities Industry and Financial Markets Association, Wall Street's biggest lobby. A day earlier, David Axelrod, a senior adviser to President Barack Obama, also said a moratorium would damage the housing market.

While some homeowners have criticized the Florida Attorney General for not taking a more aggressive stand against servicers, Wiggins said McCollum did get involved months ago by filing lawsuits against the four foreclosure law firms thought to handle most of the lenders' cases against Florida borrowers.

Three of those firms — Shapiro & Fishman of Boca Raton, the law offices of David J. Stern in Plantation and the Florida Default Law Group in Tampa — have fought state subpoenas. McCollum's investigation took a hit last week when a Palm Beach County judge ruled in favor of Shapiro & Fishman, saying the state's request was too broad, and that The Florida Bar had jurisdiction over attorney conduct.

McCollum fired back on Monday, asking Palm Beach County Judge Jack Cox to rehear the case on the grounds that the foreclosure firms were being investigated for allegedly creating improper documents to hasten the foreclosure process — constituting fraud, which would be handled by the Attorney General.

Gerald Richman, attorney for Shapiro & Fishman, called the action "a sad example of the Attorney General's Office's continual fishing expedition that wastes the taxpayer's money." Richman said the foreclosure firm was wililng to cooperate with state officials, if they narrowed their request, and to "address and rectify any legitimate complaints."

The fourth firm under state investigation, Marshall C. Watson of Fort Lauderdale, is cooperating, state officials said.

In the Stern probe, a former paralegal with the firm told investigators last month that workers there routinely signed paperwork without reading it, misdated records and skirted rules protecting homeowners

Tammie Lou Kapusta, who spoke under oath, said the Stern firm ballooned from 225 employees when she started in March 2008, to more than 1,100 when she was fired in July 2009. She described a disorganized workplace where documents got lost and mortgages were misfiled.

Kapusta's statements were reported Oct. 7 in the Tampa Tribune. Jeffrey Tew, the Miami lawyer representing Stern, denied her claims and said he wasn't aware of the interview until it was released to the public.

"We didn't get a chance to cross-examine her," he said. "It was a one-sided statement by a disgruntled employee."

There is a hearing in Broward County courts regarding Stern on Tuesday, as Tew challenges the Attorney General's action. The motion argues that the state's request violates attorney-client privilege and is too extensive.

Diane Lade sun sentinel


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