Kimberly Miller, Palm Beach Post

The Florida Bar’s investigations into foreclosure fraud by its members jumped 63 percent in the past year, but no disciplinary actions against attorneys have been levied since complaints began to mount in the fall of 2010.

The responsibility to hold lawyers accountable for foreclosure misconduct now rests solely with the Florida Bar after the state attorney general’s investigation into high-volume foreclosure law firms collapsed this week.

Since March of last year, the number of foreclosure fraud investigations of attorneys by the Bar grew from 222 cases to 362. During the same time period, about 130 cases were closed with no findings of fault. There are 229 pending cases.

Despite the lack of punitive action, Arne Vanstrum, associate director of lawyer regulation for the Florida Bar, said the regulatory group is taking the investigations seriously. And while the attorney general’s probe focused on illegal activity, the Bar’s review also includes scrutiny of ethical violations, he said.

“We’re putting a lot of resources into this,” Vanstrum said Friday, a day after Florida Attorney General Pam Bondi announced an unfavorable court ruling that effectively shut down her foreclosure mill investigations. “These cases are unique in that it’s very widespread, not just in Florida but nationwide.”

All of the leading partners in the seven firms targeted for state investigation remain members in good standing with the Bar.

Specifics of the Bar investigations are not public, but complaints generally include forged signatures on court documents, bad notarizations and backdated paperwork.

Scores of attorneys – sometimes just out of law school – have worked at Florida’s big foreclosure firms since home repossessions went full throttle in 2008.

Sanctions for attorneys guilty of misconduct range from public reprimand to disbarment.

Tampa-based foreclosure defense attorney Mark Stopa said he’s concerned that David J. Stern, once dubbed the foreclosure king of Florida, hasn’t faced reprimand.

Stern’s Broward-based firm collapsed in the fall of 2010 after the start of the state investigation and subsequent loss of clients. By early 2011, he announced he was closing shop, leaving as many as 100,000 cases statewide in limbo.

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Kim Miller, Palm Beach Post

Florida’s once-heralded foreclosure mill investigations have fizzled as the attorney general’s office has failed to find the right strategy to continue its pursuit and three law firms call for the cases to be dismissed.

This week, an attempt to have the Florida Supreme Court weigh in on whether the state has the authority to subpoena the Law Offices of David J. Stern was denied by the 4th District Court of Appeal.

The decision effectively ends the investigations into complaints that the firms doctored court paperwork in an attempt to speed foreclosures.

“It means the buck has stopped” with the appeals court, said Royal Palm Beach-based foreclosure defense attorney Tom Ice. “No appeal to the Florida Supreme Court.”

Even before Wednesday’s ruling – from the very beginning of the investigations – there has been uncertainty about how to prosecute a civil case against the firms.

In 2010, flooded with complaints about unbridled foreclosures, former Assistant Attorneys General Theresa Edwards and June Clarkson said they felt their only option to protect consumers was to go after the law firms under the Florida Deceptive and Unfair Trade Practices Act.

The act governs trade or commerce, but it is unclear whether it can be used against law firms. Attorneys for the firms argue that what they are accused of did not qualify as “trade or commerce” and that the statute is intended to protect consumers. Technically, the consumers were the banks, they say.

Now, more than a year and a half after the investigations were announced during a news conference convened by former Attorney General Bill McCollum, Edwards and Clarkson have been fired, two of the firms have closed, and it is debatable whether there is a legal path to hold the Florida firms accountable.

“This denial is significant,” Attorney General Pam Bondi’s office said in a statement. “The attorney general’s office will now assess each of its seven pending investigations into law firms for potential misconduct in foreclosure cases to determine whether there are other avenues through which the office can pursue foreclosurerelated misconduct.”

In interviews taken as part of a state inspector general’s inquiry into the May firing of Edwards and Clarkson, one leading investigator said that despite increased resources dedicated to the investigations, the state was not close to filing formal complaints.

“The Florida Office of the Attorney General still cannot figure it out,” the January report paraphrases former Chief Assistant Attorney General Robert Julian as saying about why Edwards and Clarkson shouldn’t be blamed for an inability to build a case against the firms.

The Tampa-based Florida Default Law Group points to the inspector general’s report as evidence of why the cases should end.

“It is our understanding that the attorney general’s investigation into our firm has been completed and now that the Office of Inspector General report shows the lack of any substance supporting the investigation, it should be dismissed,” said Ron Wolfe, Florida Default Law Group managing partner.

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Tom Lyons, Sarasota Herald-Tribune

A year ago, the Florida Bar issued an ethics opinion that was a warning for every mortgage lawyer who helps lenders foreclose on Florida homes.

Mark Memmott, NPR

Saying he is “completely puzzled by the notion that there was something immoral that went on here,” the man at the top of the agency that regulates Freddie Mac has explained why he believes the taxpayer-owned mortgage company did nothing wrong when one of its arms, as NPR and ProPublica have reported, “placed multibillion-dollar bets against American homeowners being able to refinance to cheaper mortgages.”

Edward DeMarco told Morning Edition co-host Steve Inskeep in an interview broadcast on today’s show that Freddie Mac’s actions were “in the class of ordinary business transactions.” The “reverse floaters” in Freddie Mac’s investment portfolio, which as NPR has reported “brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing,” did not affect the agency’s efforts to stabilize the mortgage market, DeMarco said.

Instead, DeMarco characterized the investments as part of Freddie Mac’s effort to make sure it doesn’t lose money. And he said one of his major responsibilities, is to “make sure Fannie Mae and Freddie Mac undertake activities that don’t cause further losses to the American taxpayer.”

DeMarco is acting director of the Federal Housing Finance Agency (FHFA) — the agency that regulates Freddie Mac and Fannie Mae.

Listen to the interview here

Concerned that the refusal by Fannie Mae and Freddie Mac to engage in principal forgiveness and loan modifications for struggling homeowners is slowing the nation’s economic recovery, Attorney General Martha Coakley has sent a letter urging Fannie and Freddie to reverse this stance.

Leaders of Fannie Mae and Freddie Mac have expressed an unwillingness to participate in federal loan modification programs, including principal forgiveness. In a letter  to the acting director of the Federal Housing Finance Agency (FHFA), AG Coakley insists that the FHFA should allow for principal forgiveness, guided by a net present-value analysis, which would increase loan modifications and help stabilize the housing market and economy.

“More than five million people have lost their homes due to foreclosure in the past five years, and millions more on the brink of foreclosure, struggling to stay in their homes,” wrote AG Coakley.  “Fannie Mae and Freddie Mac should be a leader in the arena of loan modification best practices, not an obstruction.  Fannie Mae and Freddie Mac should change course to serve both their own interests and those of the public and the economy.”

AG Coakley’s office has brought numerous actions against major banks and financial institutions with goal of keeping people in their homes and avoiding unnecessary foreclosures.  These include actions against Fremont, Option One, Countrywide,Morgan Stanley, Goldman Sachs and Royal Bank of Scotland which all resulted in loan modifications designed to remedy unfair and unsustainable loans in Massachusetts.  In the letter, AG Coakley points out that these modifications have helped thousands of people stay in their homes in Massachusetts.

The FHFA has acknowledged that principal forgiveness can serve the long-term interests of taxpayers when compared to foreclosure by combining the goal of asset preservation and foreclosure prevention.  According to the FHFA’s own reports, fewer loan modifications have been implemented in September, October and November 2011, than any other month since November 2010.  AG Coakley says in her letter that this trend must be reversed.

In addition, a comprehensive proposed settlement resolving allegations of servicing fraud with five major banks is expected to provide loan modifications featuring principal write-downs valued at billions of dollars.  AG Coakley says that those discussions have brought into focus the unwillingness of Fannie Mae and Freddie Mac to use principal write-downs as part of its loan modification programs, and that their refusal will impact the ability of many homeowners to get the relief that they need.

Three big banks were hit on Friday with yet another lawsuit related to wrongful foreclosures. Democratic New York Attorney General Eric Schneiderman filed suit against Bank of America, JP Morgan Chase and Wells Fargo for deceptive and fraudulent use of a private database used to register mortgages, according to a Friday press release from his office.

Schneiderman has been outspoken in urging the Obama administration to hold the nation’s largest financial institutions accountable for their role in the foreclosure crisis, notably hesitating to join a larger nationwide case against the country’s five largest banks for mortgage fraud. States now have until Monday, according to the Iowa attorney general’s office, to decide to join that deal.

The New York attorney general has yet to announce whether New York will participate in the deal because of concerns that joining the settlement would make it impossible for him to file his own, state-based lawsuits against the banks, said sources close to the negotiations who spoke on the condition of anonymity. The decision to bring this lawsuit on Friday indicates that the larger nationwide settlement is now more to Schneiderman’s pleasing, said a source familiar with the discussions.

“If the deal terms had been decided six months ago, a state couldn’t have pursued this kind of lawsuit,” said the source. “The fact that Schneiderman has filed this case suggests that the terms of the deal have changed since then.”

Last week Schneiderman was named one of five co-chairs of a new task force announced by President Barack Obama to investigate fraud related to bonds backed by mortgage loans.

The Friday suit positions Schneiderman to go after another piece of the mortgage securitization system that’s been blamed for foreclosure fraud: the system that banks use to facilitate the creation of mortgage backed securities. Banks use the Mortgage Electronic Registration Systems, or MERS, to register mortgage loan ownership. Before the creation of the system in 1995, registration took place at local courthouses, slowing down the process of bundling individual mortgages into securities. More than 70 million mortgages have been registered with MERS, according to a press release from Schneiderman’s office.

The Friday lawsuit claims that the system led to fraudulent foreclosures, undermined the state’s process for reviewing foreclosure cases and made it difficult for homeowners to access mortgage-related documents, said Schneiderman in the press statement.

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Andrew Harris, Bloomberg

Illinois Attorney General Lisa Madigan sued Nationwide Title Clearing Inc., a Florida company she claims caused the filing of faulty documents with county clerks.

“The practices that NTC used were a key contributor to the mortgage crisis by undermining the integrity and accuracy of the mortgage servicing and foreclosure process,” Madigan said today in a statement.

Nationwide Title Clearing prepares documents for mortgage servicers to use against borrowers in default, foreclosure and bankruptcy, Madigan said. Among the documents are mortgage assignments used by lenders in foreclosures.

NTC employees signed forms used in Illinois foreclosures as officers of the foreclosing financial institutions and not Nationwide, often without reading or verifying the documents they signed, Madigan said.

“NTC creates documents through an assembly-line process,” Madigan said. “NTC signers typically have little or no role in the actual creation of documents that they sign.”

Their sole role is to affix their signatures, she said.

The complaint, which accuses the Palm Harbor, Florida-based company of unfair and deceptive acts, was filed today in state court in Chicago.

Diane Stein, a spokeswoman for Nationwide, said she couldn’t immediately comment on the allegations because company officials hadn’t yet seen the complaint.

Fines Sought

Madigan seeks a court order barring those practices and requiring the company to find and fix any documents created through the “unlawful” method. She also wants the company to account for and disgorge the revenue earned from their creation.

Madigan also seeks imposition of $50,000 fines for each finding that the company breached Illinois’s Consumer Fraud and Deceptive Business Practices Act with the intent to defraud, or a single fine of $50,000 if the court finds the company violated the act without intending to commit fraud.

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Gregory Korte and Fredreka Schouten, USA TODAY

A Detroit-area law firm that represents mortgage giants Fannie Mae andFreddie Mac in foreclosure and eviction cases contributed $200,000 to a super PAC supporting Republican Mitt Romney for president.

That super PAC, Restore Our Future, has run ads against rival Newt Gingrich attacking his ties to Freddie Mac and accusing him of “cashing in” on the foreclosure crisis.

The contribution, dated Dec. 27, was written from the corporate account of Trott & Trott PC. A 2010 Supreme Court decision allowed corporations and unions to spend unlimited amounts on independent campaigns to support or oppose federal candidates.

Managing partner David Trott is a member of Romney’s Michigan finance committee. He and his wife also contributed $7,500 personally to the Romney campaign, according to FEC reports, and Trott employees also contributed more than $11,000 to Romney.

Through a firm spokesman, Trott declined to comment.

Romney spokeswoman Andrea Saul explained it this way: “To the extent anyone is supporting Mitt Romney over President Obama it is because the state of the economy and the president’s failure to create jobs.” She referred further questions to Restore Our Future.

“We don’t comment on our donors beyond what is disclosed in our FEC report,” said Brittany Gross, a spokeswoman for the super PAC. By law, super PACs can’t coordinate with candidate campaign organizations.

In debates, ads and stump speeches, Romney has blasted Gingrich for his role as a consultant for Freddie Mac after he left Congress in 1999. “He made $1.6 million in his company, the very institution that helped stand behind the huge housing crisis here in Florida,” Romney said in Dunedin, Fla., this week.

With 96 attorneys, the Farmington Hills firm is one of two law firms in Michigan authorized by both Fannie Mae and Freddie Mac, the government-sponsored mortgage underwriters, to represent mortgage servicers foreclosing on government-backed mortgages.

“David Trott, either through Trott & Trott or individually, has a complete monopoly on everything that goes on post-foreclosure on someone’s home,” said Steve Dibert of MFI-Miami, who works as a mortgage investigator for homeowners in foreclosure.

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