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Florida’s largest mortgage foreclosure law firms, including Broward County-based Law Offices of David Stern, are being accused of overcharging for fees and are facing legal challenges to how they do their work. As a result, a move is afoot to change the state’s debt-collection laws to protect foreclosure attorneys. At least four lawsuits have been filed against major firms and more are expected to be filed by current or former homeowners who have had their homes foreclosed. The suits allege the firms have violated state and, in some instances, federal laws that protect consumers against unfair debt collection practices. “This is a unique batch of suits,” says Warren Husband, the Tallahassee-based counsel for the Association of Florida Foreclosure Attorneys. “Prior to these lawsuits, I don’t believe the [fair debt collection] law had been used in this fashion,” Husband says. Besides the Law Office of David Stern, a firm that is considered the largest to handle foreclosures statewide, the suits target Echevarria McCalla Raymer Barrett & Frappier of Tampa; Codilis & Stawiarski of Tampa; and Butler & Hosch of Orlando. The cases are being heard in Leon Circuit Court and U.S. District Court in Tallahassee. Because the firms handle mortgages statewide, and the complaints either already are certified as class-action suits or are seeking that status, they collectively could affect tens of thousands of homeowners throughout Florida. The Stern and Codilis suits alone could involve 60,000 homeowners, attorneys estimate. The complaints contend that the law firms overcharged by hundreds of dollars for property title searches and exams � a common procedure that establishes who, besides a mortgage lender, might have liens or claims against a property, such as credit card companies. Those costs generally are paid by the homeowners, even though the foreclosure attorneys usually are hired by the lenders. When a home is foreclosed and auctioned off, any money collected first goes to repay the loan and fees associated with the foreclosure. If any money remains, it then goes to the homeowners, though that is rare, says a South Florida lender who spoke on condition of anonymity. When a homeowner reinstates or refinances a loan through another lender, the borrower pays the attorneys’ fees. “You have to pay any collection fees there are in paying off that first loan, and that’s where the attorneys charge much higher fees,” the lender says. Indeed, the suits allege the firms also charged homeowners for attorneys’ costs for work that actually was done by nonlawyers, falsified affidavits and bills to substantiate those costs, and added hundreds of dollars to fees the lenders were paying the attorneys to handle the cases. Further, one South Florida attorney familiar with the foreclosure process says attorneys often make fee arrangements with lenders, depending on how the property is disposed. “They’ll tell the [lender], �Look, I can’t do this for $1,200, but let me put in a fee affidavit for closer to what my time is and if the property is sold to a third-party bidder, I get the higher fee. Or if the [homeowner] refinances or reinstates the mortgage, I get the higher fee. But if the lender has to take the house back, I get the lower fee,’ ” says the attorney. “That’s the reality of the whole thing. These mills used to juice the fees by a few hundred dollars but it’s become $1,000 to $1,500 � and when you get into the bigger numbers, the class-action guys get involved,” he adds. Husband, of the foreclosure attorneys group, believes the actions began because of competitive pressures facing Claude Walker of Huey Guilday & Tucker in Tallahassee, who represents the homeowners in the Stern and Echevarria suits. “The story as it was told to me is that [Walker] had a foreclosure practice and … through consolidation in the mortgage industry, other firms ended up with the [foreclosure] work and Walker’s did not,” Husband said. “I suppose with knowledge of how foreclosures work, he developed the notion of these class-action suits.” Walker had complained about Stern’s practices to the Florida Bar in 1997 and to the Broward state attorney’s office in 1998. The Bar dismissed Walker’s complaint, saying it found no ethics violations by Stern. But the complaint was reopened after Stern was sued in the foreclosure case. The Bar’s evaluation is on hold until the suit is resolved. A $2.1 million settlement in the Stern foreclosure suit is awaiting a judge’s approval in late September. The state attorney’s office took no action against Stern and closed its investigation earlier this year. In a memo, assistant state attorney John Hanlon Jr. said he did not believe his office could prove criminal intent. Neither Stern nor his attorney, W. Wyndham Geyer Jr. of Ruden McClosky in Fort Lauderdale, would comment about the suit or proposed settlement. But, in a written statement to the Miami Daily Business Review, Stern denied any liability or wrongdoing. Rather, the settlement was reached “solely for business reasons with consideration given to available professional liability insurance coverage, and to avoid the immense burdens, waste of time and expense of continued litigation and possible trial of the matter.” Walker referred calls from the Daily Business Review to his partner, Tom Guilday. Guilday, who is widely known for a landmark title insurance case against the state Department of Insurance that is now before the Florida Supreme Court, said that while Walker began questioning fees and costs after seeing them in foreclosure cases, he’s hardly alone in his concerns. “Based on the calls I’ve gotten from attorneys around the state, if you’re successful [in foreclosures], you can make a lot of money, and there is a lot of interest in changing the way these firms are conducting foreclosures.” But Michael McGirney, managing shareholder of Marshall Dennehey Warner Coleman & Goggin in Tampa, who represents Echevarria, finds the suits perplexing. “The fees and costs that Mike [Echevarria] and his lawyers assert are owed in foreclosure proceedings are fees and costs agreed to in advance by the client who has hired them. We believe this is a groundless suit and that the fees and costs attempted to be collected were lawful,” he says. Foreclosure attorneys, though, are attempting another defense tactic. The trade group attempted to change two state laws � Chapter 702, which regulates mortgage foreclosures, and Chapter 559, the state’s fair debt collection law � during this year’s legislative session. The proposal to change the foreclosure law was dropped after members of the Real Property and Probate Committee questioned whether it created a “trial within a trial” for homeowners, says committee chairman Rep. J. Dudley Goodlette, R-Naples. That’s because homeowners would have faced 15 days in which to contest foreclosure fees and costs. Failure to do that would have been tantamount to accepting all fees, says Lynn Drysdale, staff attorney for Florida Legal Services Inc. in Tallahassee. The proposed bill also sought to make the lender’s attorney, the attorney’s law firm and the firm’s employees exempt from the state’s debt-collection law after a foreclosure complaint has been filed. When that effort failed, the bill was amended to target changes to the debt-collection law only. Largely, that meant making it more like the federal act, which addresses class-action suits, caps on class damages and a statute of limitations, says Husband. The legislative proposal will be renewed for next year’s session, he says.

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