Posted on Wednesday, November 17, 2010
The Law Offices of David J. Stern, which has helped banks seize thousands of homes from homeowners who missed mortgage payments, is now having trouble paying its own bills. One of its subsidiaries is seeking bank forbearance for defaulting loans, and the shrinking company has fallen behind on rent payments at its Plantation offices, according to a regulatory filing Monday.
DAL Group LLC, a subsidiary of Stern's public foreclosure-procesing company, DJSP, entered into a forbearance agreement with Bank of America on Friday, for a $12 million revolving line of credit. The bank, which had sent DAL a notice of default on Nov. 5, agreed not to take further action until Nov. 26, as the embattled company tries to develop a new operating plan.
Jeffrey Tew, an attorney for Stern's law office, declined to comment on the public company.
"It's all in the filings," he said.
The company took out the $12 million line of credit in March with a one-year, interest-only payment plan, and the loan was to be paid in full after a year. The default notice found that Stern owes $549,412 on the loan.
Other lenders with subordinated loans have also agreed to forbear Stern's debts temporarily, as the company looks to restructure.
The law firm has already stopped paying some of its bills. The company also has not paid its rent for the month of November at its office space at 900 S. Pine Island Road, in Plantation.
Richard Burton, a Miami foreclosure defense lawyer working on a class action suit for homeowners disposed by robo-signers, said Stern's current money trouble was "poetic justice."
"It would probably make more sense if they reduced the principal on the loan,'' he quipped. "That would allow him to stay in the building. He can hire someone like myself to help him."
Much like the troubled real estate market, Stern's firm has been enduring a post-boom decline of its own recently. After the growing five-fold in the last five years to more than 1,100 employees, a lightning round of negative news has leveled the foreclosure-processing giant in the last few months.
Attorney General Bill McCollum named Stern in a state investigation of fraudulent foreclosure practices in August, and former employees emerged in October with tell-all testimonies describing widespread document tampering at the firm.
In the past few weeks, three major banks and Fannie Mae and Freddie Mac have stopped working with the firm. Earlier this month, Stern laid off hundreds of employees, bringing its remaining workforce to about 400, said Tew.
The same day layoffs were announced, employees from a document shredding company spent hours taking boxes from the firm to a truck parked outside.
The DJSP stock price fell 32 percent on Monday to close at $0.48. It has plunged more than 95 percent since April, when it peaked at $13.65.
In a letter announcing the layoffs to Florida Agency for Workforce Innovation, a Stern representative wrote that a complete closing of the firm "remains a possibility.''
Looking to avoid that fate, Stern has brought in Tampa consulting firm Gulf Atlantic Capital to help it restructure.
Like many homeowners currently going through foreclosure, Stern is looking for a little leniency and patience from its lenders as it deals with tough financial straits.
"DAL intends to seek longer term forbearance agreements with the bank and its other creditors as it implements plans to restructure its ongoing operations to reflect its significantly reduced revenues and operations" the company filing said.
However, if things don't work out as planned, the inevitable result could be closing shop: "If it is unable to accomplish any of the foregoing, it will not be able to continue its business operations," the filing read.By Toluse Olorunnipa, The Miami Herald