Foreclosure Justice Advocates Are Thankful in 2011

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FORECLOSURE JUSTICE ADVOCATES ARE THANKFUL IN 2011

Lynn E. Szymoniak, Esq., Fraud Digest, Thanksgiving 2011

....for Nevada Attorney General Catherine Cortez Masto andChief Deputy Attorney General John Kelleher for filing criminalcharges against two employees at Lender Processing Services, allegingthat these employees filed thousands of falsified documents relating toforeclosures in Nevada. Attorney General Masto never said "I wishsomeone would do something about all of this mortgage fraud byservicers and document companies."

…for Congressman Elijah E. Cummings, representing Maryland’s 7th District, for his recognition of the importance of keeping families intheir homes, for his battle against fraudulent banking practices and forbeing a constant, strong voice against fraudulent foreclosures inAmerica.

...for Delaware Attorney General Beau Biden for filing a lawsuitagainst MERS for unfair and deceptive trade practices that plainly setsout the fraudulent activities done in the name of MERS, includingobscuring important mortgage ownership information, acting as anagent of the true owners of mortgage loans without authority, andfailing to properly oversee the MERS registry or enforce its own rulesin foreclosure proceedings. (State of Delaware v. MERSCORP,

Wilmington Division, Delaware Chancery Court). Attorney GeneralBiden also intervened in the $8.5 billion settlement proposed by Bankof America to resolve claims by investors in mortgage-backedsecurities put together by Countrywide Financial Corporation.

…for New York Attorney General Eric Schneiderman for hisdetermination to investigate whether securities laws were broken whenmortgage loans were bundled into securities, for intervening in theBank of America settlement, and for refusing any deal that would giveimmunity for criminal acts to banks or securities companies.

…for New York Judge Arthur Schack, for his intolerance of lies bybanks, for exposing the massive problem of fraudulent documentsused in foreclosures, and for writing the following in response to asworn affidavit from a bank lawyer, Margaret Carucci, that an officerfrom Downey Savings & Loan could vouch for the accuracy of thedocuments: “Ms. Carucci affirmed under the penalties of perjury thatshe communicated on Christmas Eve with the officer of a defunct



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financial institution. This is a deceptive trick and fraud upon the court.It cannot be tolerated. This Christmas Eve conduct, in the words of Ebenezer Scrooge, ins‘Bah, humbug!’” (Downey Savings and LoanAssociation, F.A. v. Trujillo, 2011 NY Slip Op 51517 (U)). JudgeSchack has led the way to honesty in courtrooms.

…for New York Times OpEd columnist Joe Nocera for bringing thephotographs of the Steven Baum Halloween party, where firmemployees mocked homeowners in foreclosure, to the attention of theworld.

...for Massachusetts Attorney General Martha Coakley forfocusing attention on Mortgage Electronic Registration Systems, Inc.and whether MERS impaired the integrity of the state’s recordingsystem. Attorney General Coakley also made it clear that she woulddo an in-depth investigation of MERS, stating, “We want to be clear weare not prepared to give a release of liability on any broad scope of MERS issues.”

…for Oscar-winning director Curtis Hanson and his HBO Film, TooBig To Fail. Can anyone ever look at Treasury Secretary HenryPaulson again without remembering William Hurt’s portrayal? Whenwe hear the name Ben Bernake, doesn’t Paul Giamatti comeimmediately to mind? But James Woods, as Richard Fuld, Charimanand CEO of Lehman Brothers, will always epitomize the cluelesscorporate executive.

…for Florida attorneys Theresa Edwards and June Clarkson whowere fired from the Economic Crimes Division of the AttorneyGeneral’s Office after targets of their foreclosure fraud investigationscomplained that these Assistant Attorneys General were tooaggressive. Edwards and Clarkson had gone after some of the mostnotorious foreclosure mills in the state, including the law offices of David Stern and Marshall Watson. They were also conducting anextensive investigation of Docx and Lender Processing Services at thetime they were forced to resign. Florida Representative Darren

Soto of Orlando called for an investigation of the firings by the U.S.Department of Justice and by the Inspector General in the AttorneyGeneral’s office.

…for Locke Barkley, the standing Chapter 13 Trustee for theNorthern District of Mississippi, and her attorneys, Nick Wooten and D.W. Grimsley, for filing a class action complaint in federal courtagainst Lender Processing Services alleging a kick-back scheme and



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unlawful fee splitting between LPS and the attorneys in its network.

…for New York Bankruptcy Court Judge Robert E. Grossman forissuing the first federal court ruling that MERS cannot transfer andassign mortgage through its electronic registry system. Judge

Grossman rejected the argument that the banks had the authority toarbitrarily change state property laws, stating, “This Court does notaccept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for thisCourt to turn a blind eye to the fact that this process does not complywith the law.” (In re Agard, 10-77338, U.S. Bankruptcy Court, EasternDistrict of New york (Central Islip).

…for Louisiana Bankruptcy Judge Elizabeth W. Magner forimposing sanctions against Lender Processing Services, stating: “Thefraud perpetrated on the Court, Debtors and trustee would be shockingif this Court had less experience concerning the conduct of mortgageservicers. One too many times, this Court has been witness to theshoddy practices and sloppy accounting of the mortgage serviceindustry. (In re Wilson, U.S. Bankruptcy Court, Eastern District of Louisiana.)

…for Guilford County Recorder Jeff Thigpen for showing inpainstaking and incontrovertible detail how foreclosure fraud haspermeated county recording offices, for standing up for the rights of homeowners, and for explaining how foreclosure fraud affects ALL

homeowners, not just those in foreclosure.

…for Massachusetts Register of Deeds John O’Brien and Marie

McDonnell who studied the records of the Southern Essex CountyRegistry of Deeds and found massive fraud. O’Brien released findingsthat 75% of the mortgage assignments in the registry are fraudulent. “My registry is a crime scene…” said O’Brien, who also has assistedother country recorders throughout the United States in understandingmortgage fraud issues and identifying robo-signers.

…for Illinois Attorney General Lisa Madigan and MichiganAttorney General Bill Schuette for issuing subpoenas to mortgageservicers Lender Processing Services and Nationwide Title Clearing aspart of criminal investigations into the practices of mortgage servicingcompanies. Just when the mortgage servicing companies thought theyhad worked out a wonderful settlement with the OCC where they werefree to investigate themselves and report back, along came theseserious criminal law enforcement efforts.



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…for Ingham County, Michigan Register of Deeds Curtis Hertel,Jr. for investigating foreclosure fraud and robo-signing and reportinghis findings. Hertel found that banks were continuing to produceforeclosure paperwork without proper reviews and signatures, despite

promises of reform.

…for Dallas County, Texas, District Attorney Craig Watkins andDuval County, Florida, Clerk of the Court Jim Fuller for bringingclass action lawsuits against MERS. The lawsuits allege that MERS actsas a “shadow recording system” for buying and selling mortgages inthe United States. The lawsuits attack the system that lists MERS asthe mortgagee on millions of loans throughout the country when MERSdid not originate the loans, lend any money or own or hold anypromissory notes.

…for Massachusetts Supreme Court Justice Ralph Gants whoupheld a lower court ruling that two foreclosures were invalid becausethe banks did not prove they owned the mortgages which had beentransferred into residential mortgage-backed trusts. The case wasexpected to affect all foreclosures done without proper documents.Judge Gants wrote, “the mortgages securing these notes are still legaltitle to someone’s home or farm and must be treated as such.” Thecase was seen as a significant warning to all purchasers of foreclosedproperties to be certain that an unbroken chain-of-title could beestablished prior to making any purchase of residential real estate.

…for Scott Pelley, Robert G. Anderson and Daniel Ruetenik of 60

Minutes for their segments “The Hard Time Generation” and “The NextHousing Shock.” Americans needed to see school buses stopping atcheap motels in Orlando for children who have lost their homes and tohear that the poverty rate for children in America would soon hit 25%.For tens of thousands of people with mortgage documents signed byLinda Green, the image of Chris Pendley forging Green’s name tomortgage documents was the best possible confirmation thatsomething is rotten in the state of Denmark. This segment provided

the impetus for country recorders with conscience to take actionagainst mortgage fraud.

…for California Attorney General Kamala Harris for herdetermination to investigate and expose the root causes of California’smortgage crisis by issuing subpoenas to Fannie Mae and Freddie Mac.

…for U.S. District Judge William Pauley in Manhattan for



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recognizing the significance of the Bank of America settlement whenhe wrote, “This action concerns far more than the financial interests of a few sophisticated investors,” and when he decided, “The interventionof the state AGs in this action will protect the interests of absentinvestors.” (Bank of New York Mellon v. Walnut Place, LLC, 11-cv-

05988, USDC, Southern District of New York (Manhattan).

…for Academy Award Winning Director Charles H. Ferguson forthe movie Inside Job which documents the 2008 financial meltdownand why it was avoidable. Ferguson himself has said that the film isabout the systemic corruption of the United Sates by the financialservices industry. There is a reason this film won the Academy Awardfor Best Documentary as well as many other film critic awards. It ischilling to watch.

…for filmmaker and author Michael Moore and his advocacy on behalf of a nationwide moratorium on home foreclosures and his work toexpose “liar liens.”

…for Florida Appellate Court Judge Juan Ramirez, Jr., who wrotein his dissent, “I dissent because I cannot condone the unprofessionaland unethical means used by the bank’s counsel, with the trial court’scomplicity, to obtain an amended final judgment in this case…This caseis the quintessential denial of due process. Due process requiresnotice and an opportunity to be heard. Here appellant was grantedneither. A final judgment was amended from $216,485.73 to

$529,630.64, and the appellant was only informed after the fact whenhe received the conformed copy in the mail…In my view, to affirmwhat happened here requires that we turn a blind eye to the FloridaRules of Civil Procedure, the Florida Bar Rules of Professional Conduct,and the Code of Judicial Conduct, to say nothing of the Constitutions of the United States and the State of Florida.” (Phillips v. CentennialBank, No. 3D10-2910, (Fla. 3rd DCA 2011).

…for Dylan Ratigan for making the word “fraudclosure” part of theAmerican vocabulary and for telling the story of tens of thousands of

American families impacted by fraudulent foreclosures when much of the rest of the country would only focus on investors’ losses.

…for April and Nye – because when everyone in a movement knowsyou by your first name, you have fought the longest and been aninspiration to the most.

…for Massachusetts Land Court Judge Keith C. Long for his



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careful, thoughtful common-sense ruling in the case of Antonio Ibanez,a case eventually upheld by the Massachusetts Supreme Court.

…for the Bankruptcy Trustees and Judges including Hon. TraceyHope Davis (Northern District of New York), Hon. Martin Glenn

(Southern District of New York), Hon. Harry C. Dees, Jr. (NorthernDistrict of Indiana), Hon. Diane Sigmund Weiss (Eastern District of Pennsylvania), Hon. Joel B. Rosenthal (Massachusetts), Hon. Joan

M. Feeney (Massachusetts), and, of course, Hon. Christopher Boyko (Ohio) for carefully scrutinizing the evidence presented by the banksregarding ownership claims of notes and mortgages.

…for Hon. William G. Young of Massachusetts who put the blamesquarely on the legal profession, stating:

After 43 years at the bar, the saddest thing about this case isthe conduct of the lawyers — all the lawyers. A careful readingof the briefs in this case reveals only a single recognition thatcounsel did anything amiss in their misrepresentations to theBankruptcy Court. There’s blame aplenty, of course, each oneblaming everyone else — including the hapless bankrupthomeowner. ... How is it that our profession, the legalprofession —which could have and should have stronglycounseled against the self interested excesses that set up thecollapse — instead has eagerly aided and abetted those veryexcesses? How could we (all of us who profess to be lawyers)

have fallen so low?” (In re Nosek, 386 B.R. 374 (Bankr. D.Mass. 2008)

…for Neil Garfield and his Livinglies weblog for his endless efforts toeducate consumers and their lawyers on “the largest economic fraud inhuman history.” Neil is the source of so much valuable information –he is a one-man Consumer Protection Bureau and THE SOURCE forforeclosure defense.

…for Michael Olenick of LegalPrise for building Findthefraud.com,

allowing citizen researchers the power to view documents quickly andthoroughly, eliminating the impediments in the systems set up bymany county recorders.

…for the ACLU for fighting for the rights of homeowners and forexposing courtroom injustices.

…for Floridians Lisa Epstein, Damian Figueroa, Michael Redman,



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and Matt Weidner for speaking the truth on their blogs, at greatpersonal cost, assisting tens of thousands of citizens across thecountry who educate themselves regarding foreclosure fraud andinjustice, and reporting what actually goes in in county courtroomsevery day.

…and finally, for JPM Chase’s CEO Jamie Dimon for his definition of foreclosure as debt relief, for BOA’s CEO Brian “We have a right tomake a profit” Moynihan, for the partiers at the Steven BaumHalloween party, to Cheryl (“David Stern buys me a new BMW everyyear”) Samons, for Stern crony Miriam (“Let ME find the fraud”)Mendieta and for screaming Representative Joe Walsh, for illustratingthis quotation from historian David C. McCullough:

History is not the story of heroes entirely. It is often the storyof cruelty and injustice and shortsightedness. There aremonsters, there is evil, there is betrayal. That’s why peopleshould read Shakespeare and Dickens as well as history – theywill find the best, the worst, the height of noble attainment andthe depths of depravity.

#



DARRn.L r: ISSA, CALIFORNIA ONE HUNDRED TWELFTH CONGRESS U.IJAH E CUMMINGS, MARYLANDCHAIHMAN RANKING MINORITY MEMBER

DAN BURTON, INDIANA EDOLPHUS TOWNS, NFW YORK

JOHN L MICA, FLORIDA CAROLYN B. MALONEY, NEW YORK(!Congress of tbe Wntteb ~ t a t e sODD RUSSELL PLATTS, PFNNSYI VANI!\ H CANOR HOLMES NORTON,

M ICHACL R TURNER, OHIO DISTRICT OF COLUMBIAPA TRICK McHENRY, NORTH CAFWLlNA DENNIS J KUCINICH, OHIO

JIM JORDAN, OHIO JOHN F. TIERNEY, MASSACHUSETTSl,oltgr of l\rpregentatiuegJASON CHAFFETZ, UTAH WM LACY CLAY, MISSOURICONNIE MACK, FLORIDA STEPHEN F. LYNCH. MASSACHUSETTSTIM WALBERG, MICHIGAN COMMITIEE ON OVERSIGHT AND GOVERNMENT REFORM JIM COOPER. ll:NNESSEE

JAMES LANKFORD, OKLAHOMA GERALD E. CONNOLLY, VIRGINIAJUSTIN AMASH, MICHIGAN MIKE QUIGLEY, ILLINOIS

AN N MARIE BUERKLE, NEW YORK 2157 RAYBURN HOUSE OFFICE BUILDING DANNY K. DAVIS, ILLINOIS

PAUL A GOSAR, D D.S., ARIZONA BRUCE L. BRALEY, IOWA

RAUL R. LABFlADOR. IDAHO PEHR WELCH, VERMONTWASHINGTON, DC 20515-6143PATRICK MEEHAN, PENNSYl VANIA JOHN A. YARMUTH, KENTUCKY

sc:on Drs,JARLAIS, M .D , fFNNESSH CHRISTOPHER S. MURPHY, CONNECTICUTM i \ " . ' H I ~ (;'O?):'2b ' ,0/4,fOE WALSH, ILLINOIS JACKIE SPEIEH, CALIFORNIA

f ,\( 'dMII I l,'O?) ??'i 397·.1TRFY GOWDY, SOUTH CAROliNA

MIN' )HI; ( 1?02, . ! ; ' ~ , ' ) o ~ ) 1DENNIS A. ROSS, FLORIDA

FRANK C. GUINTA, NEW HAMPSHIHE

BLAKE FI\RFNTHOI 0, TEXAS

MIKE KELLY, PENNSYLVANIA

LAwnENCl J UHADY

STAFF DIRf:.CTOH February 25,2011

The I-Ionorable Steve A. Linick

Inspector General

Federal Housing Finance Agency

1625 Eye Street, NW

Washington, DC 20006

Dear Mr. Inspector General:

I am writing to request that you initiate an investigation into widespread allegations of

abuse by private attorneys and law tirins hired to process foreclosllres as part of the "Retained

Attorney Network" established by Fannie Mae. I also request that you examine allegations of

abusive behavior on the part of default managenlent firms engaged by both mortgage servicers

managing Fannie Mae-backed loans and attorneys and firms that are part of the Retained

Attorney Network. Finally, I request that you examine efforts by Fannie Mae and the Federal

I-Iousing Finance Agency (FHF'A) to investigate these allegations and implement corrective

action.

Allegations of Abuse in the Retained Attorney Network

In August 2008, Fannie Mae created "a new nlandatory network of retained attorneys to

handle all foreclosure and bankruptcy matters" relating to Fannie Mae mortgage loans, whether

held in portfolio or mortgage-backed securities. Fannie Mae required that only these retained

attorneys represent Fannie Mae 1110rtgage servicers, and it established the maximum allowable

reinlbursable fees for foreclosure-related work. I In December 2010, Fannie Mae Executive Vice

President Terence Edwards announced that the Retained Attorney Network would be expanded

from 31 to 50 states.2

I Fannie Mae, Netv Foreclosure and BankruptL)l Attorney Netvvork and Attorney's Fees

and ('osts (Announcement 08-19) (Aug. 6, 2008) (online at https://www.efanniemae.com/st/guides/ssg/annltrs/pdf/2008/0819.pdt) (requiring also that '''requests for approval of excess

fees by Fannie Mae must be submitted via email''!).

2 Testilnony of l'erence Edwards, Executive Vice President, Credit Portfolio

Managelnent, Fannie Mae, before the u.S. Senate Committee on Banking, Housing and Urban

Affairs (Dec. 1,2010) (online at www.fannielnae.coln/medialpdf/Edwards_

SenateBankingComnlittee_12-1-10.pdt).



'The Honorable Steve A. Linick

Page 2

Recent reports indicate that nlany of the private attorneys, law firms, and other entities

participating in the Retained Attorney Network have been accused of practices that are fraught

with flaws, errors, conflicts of interest, and fraud, and these allegations have prompted numerous

state and federal investigations.

For example, on August 10, 20 la , the Florida State Attorney General announced an

investigation into unfair and deceptive practices by the Law Offices of David J. Stern, P.A., the

l.Jaw Offices of Marshall C. Watson, P.A., and Shapiro & Fishnlan, L.L.P. The allegations

against the tirlns include creating and filing with Florida courts improper documentation to speed

foreclosures and establishing affiliated companies outside the United States to prepare false

documents.3In announcing this investigation, the Attorney General stated:

On nunlerous occasions, allegedly fabricated documents have been presented to

the courts in foreclosure actions to obtain final judglnents against homeowners.

Thousands of final judglnents of foreclosure against Florida homeowners may

have been the result of allegedly inlproper actions of the law firlns under• •• 4InvestIgatIon.

Fornler enlployees of the Stern law firn1 also reportedly alleged that the firm engaged in

"robo-signing," a practice in which employees signed hundreds of foreclosure affidavits each

day, falsely swearing to have personal knowledge of the underlying documents. One employee

testified that the firln' s chief operating officer "signed as Inany as 1,000 foreclosure affidavits a

day without reading a single word."s The elnployees also reported that the firln backdated and

altered documents, and that it took steps to cover its 111isconduct by changing the dates on

hundreds of docUlnents.6

Last November, Fannie Mae issued a public notice stating that it had "terminated its

relationship with the Law Offices of David J. Stern" and inforlning servicers that they "may notrefer any future Fannie Mae nlatters to the Stern finn.,,7

S e p a r a t e l y ~ the U.S. Trustee Progranl (UST'P) of the Department of Justice is

investigating another firnl in the J{etained Attorney Network, the firln of Steven J. Baum, P.C. of

A111herst, Ne\v York, for tiling foreclosure dOClunents that appear to be false or m i s l e a d i n g ~

3 Attorney General of Florida, Press Release: Floril1a Lalv Firms Subpoenaed Over

F'oreclosure / ~ i l i n g [Jractices (Aug. 10, 2010) (online at \vww.nlytloridalegal.com/newsrel.nsfi

newsreleases/2BAC 1AF2A61 BBA398525777B0051 BB30).

4/e.

5 1'he l?ise anel J?all qf'o J ~ ' o r e c l ( ) s u r e K i n ( ~ , Associated Press (Feb. 6, 2011).

6 Questions Risin<.g ()ver F'annie anlll;rel/llie 's ()vers(ght q f ~ F o r e c l o s u r e s , New York

rrilnes (Oct. 19,2010); The Foreclosure M a c h i n e ~ New York 'Tilnes (Mar. 20,2008).

7Fannie Mae, L)ervicing Notice: ]'erlnination ( ~ f ' R e l a t i o n s h i p lvilh the Stern Lavv Firm

(Nov. 1 20 10) (online at w\vw.efanniemae.com/sf/guides/ssg/annltrs/

pdf/20 1O/ntce 11101 a.pdf).



~ r h e J-Ionorable Steve A. Linick

Page 3

attel1lpting to foreclose on borrowers after rejecting their attelnpts to 111ake on-tinle p a y m e n t s ~ and failing to prove ownership of mortgages as it seized homes. The firm has also been accused

of illegally charging for foreclosure-settlement conferences, overcharging on foreclosure fees,

and racketeering.8

Another firnl in the Retained Attorney Network, McCalla Raymer, L.L.C., is a defendant

in a federal lawsuit in which the plaintit1s allege that it engaged in fraud, racketeering, and the

manufacture of fraudulent foreclosure documents. Reportedly, this firnl established operations

in Florida under the nalne Stone, McGehee & Silver and hired ten forlner Stern law firm

elnployees.9

The firm Stone, McGehee and Silver, LLC, dba McCalla Raymer currently appears

as a "Designated Counsel/Trustee" in Florida for Freddie Mac.ID

Lender Processing Services, Inc. (LPS), a $2.8 billion company headquartered in

Jacksonville, Florida-and the largest provider of default loan services in the nation-is also

under investigation by the Florida Attorney General for producing apparently forged or

fabricated dOCUl1lents in foreclosure actions. 11 LPS is also a defendant in a federal suit alleging

an illegal fee-sharing schelne. Filed in federal bankruptcy court in Mississippi, the suit alleges

that LPS and another company, Pronlmis Solutions I-Iolding COlnpany, illegally required

attorneys in their networks to turn over a portion of their fees for foreclosure services, and that

another large law firnl, Johnson & Freedman, I-J.L.C., joined in this schenle. The Chapter 13

'rrustee [or the Northern District of Mississippi, a unit of the DepartInent of Justice, has joined as

a plaintiff. 12

A special investigation by Reulers last Decelnber reported that LPS and its affiliated

cOlllpanies also al legedly deployed low-skilled, non-lawyers to prepare foreclosure documents,

created invalid Inortgage assignl1lents to facilitate foreclosures, and rewarded attorneys for speed

rather than accuracy in filing court pleadings. Reuters reported:

8 See Federal Honle [.Joan Mortgage Corp. v. Raia, SP 002253/10, District Court of

Nassau County, New York (Henlpstead); Campbell v. Baunl, 10-cv-3800, U.S. District Court,

Eastern District of New York ( B r o o k l y n ) ~ Menashe v. Steven J. Baum P.C., 10-cv-5155, U.S.

District Court, Eastern District ofNe\v York (Central Islip); and Saum v. Lask, 2010- 012048,

New York Suprenle Court, f ~ r i e County (Buffalo).

9 Novice J:;7orida Lcnv)Jers D r a ~ v l.)llSIJicion in Foreclosure A1ess, Palm Beach Post (Jan.

13, 2011 ) (online at www.palnlbeachpost.com/nl0ney/real-estate/novice-florida-lawyers-draw

suspicion-in-foreclosure-nless-1146402.htnl1).

10 Freddie Mac, (]uicle Exhibit 79: Designate(/ ("olinselIT'rustee (Florida) (revised 2/8/11)

(online at wvvw. freddienlac.coln/service/nlsp/exh 79_ n.html).

II ()ftice of the Attorney General of l o r i d a ~ Case Nunlber L10-3-1 094 (online at

http://nlyfloridalegal.conl/_85256309005085AB. nsf/0/98099A9003203 OBE85257713 00426A

68?C)pen&I-lighlight==0,lps).

12 'Thorne v. Pronlnlis Solutions I-Iolding Corp. et aI., Second Amended Class Action

COlnplaint, 10-01172 (BR N . D . M . S . ~ Oct. 10,2010).



l"'he I-Ionorable Steve A. Linick

Page 4

The law firiTIS are on a stopwatch. [An LPS spokesman] COnfirlTIed that the LPS Desktop

systelTI automatically tinles how long each firm takes to complete a task. It assigns firnls

that turn out work the fastest a "green" rating; slower ones "yellow" and "red" for those

that take the longest. Court records show that green ratings go to firiTIS that jump onoffered assignlnents from their LPS computer screens and almost instantly turn out ready

to-file court pleadings, often using teanlS of low-skilled clerical workers with little

oversight fro111 the lawyers. 13

Although Fannie Mae terll1inated its relationship with the Stern law firm last November,

it does not appear to have terminated its relationships with any of the other firms described

above.14

I ~ e q u e s t for Investigation

T'hese are serious allegations that nlay have affected thousandsof homeowners. For these

reasons, I request that your office initiate a cOlnprehensive investigation into allegationsof abuse

by attorneys and law firms participating in the Retained Attorney Network, as well as servicers

and default loan service providers alleged to have participated in these abuses.

It is Illy understanding that the ll1ission of your oflice is to "promote the economy,

etliciency, and effectiveness of the FHFA's progranls; to assist FHFA in the perforn1ance of its

111ission; to prevent and detect fraud, waste, and abuse in FHFA' s p r o g r a l n s ~ and to seek

sanctions and prosecutions against those who are responsible for such fraud, waste, andabuse.,,15

In 2008, FHFA replaced the Office of Federal Housing Enterprise Oversight and became the

regulator and conservator for Fannie Mae. As such, the agency's duties include overseeing the

"prudential operations" of Fannie Mae and its contractors and ensuring that their activities and

operations "are consistent with the public i l l t e r e s t . ~ , 1 6 With this background, I request that you address the following issues with respect to

attorneys and law firnls participating in the Retained Attorney Network program and with

respect to other entities engaged by both mortgage servicers Inanaging Fannie Mae-backed loans

and attorneys and finns that are part of the Retained Attorney Network:

1. '"1"'0 what extent have hon1eo\vners lost their hon1es to inlproper, illegal, or otherwise

invalid foreclosures as a result of the types of abuses described above?

13 Jd.

14 Fannie Mae, I?etainecl /ll1orney List (effective February 10,2011) (online at

https:IIw\vw. efanni enlae.colnlsf/techno logyIservinvreportlanln/pd fl retainedattorneylist.pdf).

15 Website of the Federal I-lousing Finance Adn1inistration Office of Inspector General

(accessed on Feb. 3,2011) (online at Www.fllfaoig.gov/).

16 Section 1313(a)(1 ( A ) - ( B ) ~ I-Iousing and Economic Recovery Act of 2008 (P.L. 110

289).



'rhe I-Ionorable Steve A. Linick

Page 5

2. To what extent have homeowners been charged inlproper, illegal, or otherwise invalid

fees during the foreclosure process?

3. 1"0 what extent are attorneys, law iirlTIS, and other entities engaged in fee-splitting,kickbacks, or other silnilar schenles?

4. What is the total anlount in '·excess fees" that has been requested from Fannie Mae by

attorneys and law firlns? Of this amount, how much has been reilnbursed, and how nluch

has been deterlnined to be inappropriate or unwarranted?

5. I-lave FJ-IFA or Fannie Mae conducted investigations into allegations of abuse by

attorneys, law firlTIS, or other entities, and if so, \vhat are the results? Were these

allegations considered before the recent expansion of the Retained Attorney Network to

all 50 states?

6. What specific inforlnation has been collected regarding allegations against the following

firnls and their affiliates?

a. Law Offices of David J. Stern, P.A.

b. l.law ()ftices of Marshall C. Watson, P.A.

c. Shapiro & Fishn1an'l l.l.L.P.

d. Steven J. Baunl, P.C.

e. McCalla Raymer, L.L.C.

f. Johnson & Freednlan, L.L.C.

g. Prolnmis Solutions I··Iolding COlnpany

h. Lender Processing Services, Inc. and LPS Default Solutions, L.L.C.

7. t-Iave there been claims alleging that other attorneys or law firms participating in the

Retained Attorney Network progranl or any default nlanagement firms Inanaging the

foreclosure of Fannie Mae-backed loans have engaged in similar conduct that violates the

rights of borrowers or investors, federal or state foreclosure Initigation prograln

guidelines, federal or state la\v, federal or state judicial requirements, state bar ethics

requirelnents, or other regulations, rules, guidelines, or laws?

8. 'fo what extent have the alleged abuses described above underlnined loss and foreclosure

nlitigation efforts and outcoll1es? What responsibilities do loan servicers have in

1110nitoring and overseeing the activities of attorneys and other third party companies?

What are the levels of cure rate and loss Initigation activities among retained attorneys?



'rhe Honorable Steve A. Ljnick

Page 6

If you have any questions about this request, please have a member of your staff contact

Lucinda LJessley of the conlmittee staff at 202-225-4290.

'r'hank you for your consideration, and please feel free to contact me or my staff with any

questions.

Sincerely,

cc: The Honorable Darrell E. Issa, Chairnlan

Foreclosure Justice Advocates Are Thankful in 2011

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