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Several banks lost confidence in law firms who handled a huge volume of its foreclosures that resulted in a “robo-signing” scandal from shoddy reviews of loan documents. Now banks are dropping these law firms and looking for replacements, which is causing more delays in foreclosures, The Wall Street Journal reports.
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While fewer homes are being foreclosed upon, late fees for home owners seeking loan modifications are adding up and home owners becoming upset that they haven't heard from lawyers regarding their cases.
"It's causing chaos because nobody knows who's representing whom," Thomas Ice, a foreclosure defense lawyer in Royal Palm Beach, Fla., told The Wall Street Journal.
In Florida alone, Fannie Mae and Freddie Mac ended their relationship with the Law Offices of David J. Stern, a firm that once handled 20 percent of all foreclosures in the state and that is being investigated on allegations of wrongdoing in processing foreclosure documents. The law firm recently has said it is unable to process paperwork needed to withdraw from 100,000 cases.
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Florida is one of 23 states where foreclosures are required to be processed through courts.
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Meanwhile, the backlog in foreclosures is causing trouble for some home owners who must continue to wait for an answer from banks. Some home owners in Florida say they’ve been trying to get a loan modification on their home for the past two years. Another home owner says she’s been trying to do a “deed-in-lieu” of foreclosure, but continues to hear nothing from the lawyers assigned to the case.
A Fannie Mae spokeswoman recently announced that foreclosure files from terminated law firms had been transferred to new lawyers. The government-sponsored enterprise has approved 16 law firms to handle its cases in Florida alone, which is a jump from nine last year. Freddie Mac says it also has increased the number of law firms it’ll be using in Florida, from 4 to 14.
Source: “Foreclosures Trapped by a Lack of Lawyers,” The Wall Street Journal (May 4, 2011)
