Law firms from throughout the country have opened offices in Florida to capture foreclosure business abandoned by the Law Offices of David J. Stern and Ben-Ezra & Katz in the wake of investigations into possible foreclosure fraud.
The largest of the new firms is Atlanta-based McCalla Raymer, which has four Florida offices, including one in downtown Fort Lauderdale. McCalla Raymer has about 21 attorneys in Florida and is one of a handful of firms under contract to Fannie Mae or Freddie Mac in Florida.
The new Florida firms have taken over files from Stern and Ben-Ezra Katz, once two of the largest foreclosure firms in Florida. They left tens of thousands of foreclosure files up for grabs after they withdrew from the foreclosure business following allegations of "robo-signing" and other improper or sloppy handling of residential foreclosures and after being terminated by Fannie Mae and Freddie Mac.
For years, Plantation, Fla.-based Stern was known as Florida's foreclosures king, employing more than 200 attorneys to handle 70,000 cases a year for the nation's largest lenders and servicers at its peak. But Stern and other firms drew fire from the Florida attorney general's office, judicial sanctions and class action suits claiming they rushed through foreclosures without proper documentation, review and process serving. One large foreclosure firm, Law Offices of Marshall C. Watson, reached a $1 million settlement with the AG's office.
New foreclosure filings slowed significantly in Florida as Fannie, Freddie, lenders and servicers struggled to reassign thousands of files from the old firms and overhauled their procedures. Residential foreclosures in Florida were down 59 percent in the first half of the year compared to the same period last year, according to RealtyTrac.
Meanwhile, out-of-state firms have lined up to take over the files and position themselves for new business.
Atlanta-based McCalla Raymer, North Carolina-based Brock & Scott, Atlanta-based Aldridge Connors, Massachusetts-based Ablitt Scofield, New Jersey-based Mark J. Udren & Associates, Atlanta-based Pendergast & Associates, Philadelphia-based Phelan Hallinan & Schmieg and Atlanta-based Johnson & Freedman all opened in Florida in the past year.
Most have chosen Fort Lauderdale as their South Florida base. Some have vowed to keep a tight rein on their operations and not allow shoddy practices.
"When everything happened last fall with David Stern and the robo-signing investigations, there seemed to be an opening in the Florida market, and we found the right people to partner with," said Marty Stone, managing partner of McCalla Raymer. "We want to try to mirror the success we've had in Georgia. We didn't want to just hire a few people on the ground and manage everything remotely. That was one of the issues with Stern. He was too focused on Fort Lauderdale."
As the new firms descended on Florida, some local firms added foreclosure divisions to capture some of the shifting business. Fort Lauderdale-based Greenspoon Marder expanded its foreclosure division but declined to comment for this article. Broad and Cassel also launched a foreclosure division late last year in three offices and is handling more than 1,000 cases for banks such as Wells Fargo, Fort Lauderdale managing partner Gabe Imperato said. "We are charging our full rates," he said.
Fort Lauderdale-based Tripp Scott also launched a foreclosure division last November, shortly after winning a Fannie Mae bid. The firm has 5,000 foreclosure files and hired about 25 lawyers and paralegals to process them, managing partner Ed Pozzuoli said.
"We knew before we became involved in the process that there were serious issues that were well-documented," he said. "We knew there would be challenges. However, despite those challenges we have moved forward, and it's going pretty well."
Fannie and Freddie's plan this time is to spread out the work among more firms instead of concentrating it with a few large firms to prevent them from turning into assembly-line factories.
"The whole approach by Fannie and Freddie is to have a lot of firms instead of a huge skyscraper," said Jonathan Broder, a Miami legal headhunter and owner of MyMotionCalendar.com, a contract lawyer service. "They don't want to concentrate business with one or two firms. The idea is the more you spread it out, the better. Otherwise they could have sent all the files to one of the big firms and re-created David Stern."
The foreclosure firms have hired Broder's firm to provide "coverage attorneys" for routine foreclosure hearings.
The new law firms are being handed 3,500 to 5,000 transfer files from Stern or Ben-Ezra at $1,200 to $1,400 a file, Broder said.
Fannie Mae, under a congressional spotlight, is taking an active role to make sure the firms maintain proper procedures and even sits in on lawyer interviews at firms, Broder said.
"Fannie and Freddie did their own interviews with these people so they'd feel comfortable," he said. "They are taking a whole different approach than they did previously."
When choosing new law firms, Fannie Mae considered the following criteria: attorneys in good standing with the Florida Bar and local bar associations, demonstrated experienced in handling foreclosures and providing quality and cost-efficient work, diversity and overall capacity to handle the foreclosure volume, among other considerations, said spokeswoman Amy Bonitatibus.
When asked how lenders ensure their new counsel do not run into the same issues as their predecessors, Bonitatibus said, "Under Fannie Mae's contractual relationship with its loan servicers, the servicers are responsible for monitoring and managing the conduct of foreclosure proceedings."
But some foreclosure defense lawyers question just how different the new firms are from the old ones since many of the newcomers have hired former Stern and Ben-Ezra lawyers and staff. And the practices, while much improved from the days of robo-signing, still fall short, they say.
Numerous former Ben-Ezra employees now work at Brock & Scott, which opened in Fort Lauderdale earlier this year.
McCalla Raymer hired former attorneys and staff from both Stern and Ben-Ezra, Stone said, adding his firm vetted the former employees for Bar complaints. Fannie Mae also vetted them, he said.
"Obviously Florida is a priority for them," Stone said. "They want to make sure that what happened with Stern and Ben-Ezra doesn't happen again."
Stone said he would not rule out former Stern or Ben-Ezra employees simply due to their previous employment.
"I wanted to make sure everyone was judged by their personal merits," he said.
Pozzuoli, too, said he did not rule out former Stern and Ben-Ezra lawyers and employees but has just hired a couple.
Joseph Klein, a foreclosure defense attorney with Naples, Fla.-based Legal Aid Service of Collier County, said he sees a difference in the new law firms' work.
"They're not as rushed," he said. "They're not trying to get 10,000 files out the door every month like the big firms. There are so many of them and the volume they are handling is much lower. It's like splitting up Ma Bell."
While the new firms are not repeating previous "clownish" mistakes such as stamping names upside down and putting the wrong captions on pleadings, their pleadings are thin, Klein said.
"You used to get these tortured allegations, but now they are carefully crafting their pleadings so they say almost nothing," he said.
Thomas Ice, a major voice in the foreclosure defense bar with Royal Palm Beach, Fla.-based Ice Legal, said he is seeing some of the same sloppy work with new firms.
"All they are doing is hiring the same lawyers who were problematic to begin with," he said. "Unless they put in some special programs to teach young lawyers right out of law school how to conduct themselves as officers of the court, you will see the same problems you always have."