A whopper of a foreclosure mistake
Imagine a stranger serving you foreclosure papers as you stand in your front yard -- even though you've never missed a payment.
According to RealtyTrac, about one in every four home sales in the second quarter this year was a foreclosure.
In former bubble markets like Florida, Nevada, and parts of California and Arizona, the numbers are even higher: 56% of home sales in Nevada were foreclosures. RealtyTrac also reports that the sale price of a foreclosed home is about 26% below the average home's market price, thus depressing the price of all homes in the market.
But while foreclosures have a negative impact on those losing their houses and those living nearby, not everyone is a loser in the foreclosure process. Some of the firms that produce and process the paperwork necessary to kick a homeowner out are making money -- a ton of it.
Of course, there's nothing wrong with making money, including profiting from putting people out of their homes. After all, if homeowners can't pay, they can't stay -- and somebody's got to do the detail work of legally reclaiming the property for the lender.
But as you may have read in the first article in this series, some foreclosure defense lawyers are now alleging that some of the law firms that file foreclosures are playing so fast and loose with the rules that people's rights are being trampled on and courts are being defrauded. Defense lawyers -- at least, all three I interviewed -- contend that some law firms hired by banks to process foreclosures aren't properly preparing the paperwork that separates home and homeowner.
For an example of what can happen, meet Hugo San Martin. Watch the video below, then meet me on the other side for more.
You're not seeing this story simply because a law firm mistakenly sued an innocent homeowner for foreclosure. The reason San Martin's story made the news is that the law firm in question -- David J. Stern's -- not only erroneously filed a foreclosure, but didn't correct the mistake until San Martin hired a lawyer.
They could have responded to his calls and avoided this bit of bad publicity. Why didn't they? Perhaps because they were busy -- extremely busy. According to their representative, lawyer Jeffrey Tew, Stern employs more than 1,000 people (or did -- since I talked to Tew, the firm is now apparently laying people off) and in 2009 alone processed more than 70,000 foreclosures. If all they earned in legal fees was $1,000 per foreclosure, that's $70 million.
The problem is that the practice was so large that there was never actually -- I had actually been yelled at for trying to talk to homeowners on the phone. You're giving them too much time. Start working.
I worked for hospice for 12 years before I went to David Stern so I just thought that there might be some kind of compassion. I would try to deal with what wasn't being done proper. We were directed that that was not what our job was to do. Our job was to run the team and type the MSJs (Motions for Summary Judgment), get them out the door. Get the judgments entered. Everything was about getting the judgment entered because we have to report back to the banks.
As to the mistake regarding San Martin's mortgage, there are two ways of looking at errors like this. The first is that in any high-volume office, legal or otherwise, mistakes will get made and perhaps not properly addressed in a timely fashion -- that's just the way it is. The second way of looking at it is that mistakes like this should never be made if the responsible parties act responsibly.
The other day I watched two people discuss this exact issue on a cable news channel. The guest took the position that these types of foreclosure mistakes are inexcusable. The host countered that mistakes happen, and used as an example the fact that the police sometimes accidentally break down the wrong door and arrest the wrong guy.
Oddly enough, I had used the same example with San Martin's lawyer, Jeff Golant. His response?
David Stern's not a police officer. He's doing this to make money. It's not a government service that he's providing. He's trying to make money and doing a better job would cost him more money. So to increase his bottom line, the burden's falling on people like Hugo. And that's not right.
Was this mistake excusable? Is it just a part of doing business? I can't include a rebuttal from Stern's firm to help you decide: They didn't return multiple calls.
"David and foreclosure lawyers are foreclosing legitimate mortgages that are in default," Tew told Bloomberg. "And yet, they have been successfully villainized."
In the final installment
The three foreclosure defense attorneys I talked to for this series work in -- to put it politely -- less than luxurious surroundings. In fact, we could barely fit our camera into their offices. In the final part of this series, you'll see how the attorney on the other side lives.
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