Most Americans dread hearing the word “foreclosure,” but for some companies the word sounds like a cash register clicking open.
Each month, hundreds of thousands more homes enter into foreclosure, and according to some reports, as many as 10 million more homes may be foreclosed on by 2012. As a result, banks have increasingly relied on independent law firms to help process and expedite the excess amount of foreclosure filings.
These firms, which some refer to as foreclosure mills, have existed for many years but rose to a new level of prominence and infamy during the recession. Back in 2007, the Wall Street Journal reported that lawyers working at these law firms are usually paid based on how many foreclosure filings they process, which leads them to rush through cases, sometimes employing questionable practices.
According to the New York Times, these firms have been known to levy unwarranted fees against homeowners during the foreclosure process and have even gone so far as to foreclose on homes that were had not in fact defaulted on their mortgage payments. What makes these firms particularly dangerous is not just that they make errors, but by processing claims at super speeds, they allow homeowners less time to review and refute these foreclosure notices and fees.Yet, for all that is wrong with this practice, these foreclosure mills continue to operate, with many firms processing thousands of foreclosure claims a month and making some serious revenue in return. Experts estimate that some firms earn anywhere from $3 million to more than $10 million a year from this practice.
The firms exist in cities throughout the country including Houston and Atlanta, but Florida is at the eye of the storm. This state has one of the worst foreclosure rates in the country and the situation is so dire in some counties that courts have resorted to fast-tracking foreclosure hearings by keeping them to 20 seconds or less.
In particular, critics have focused on the law firm of David J. Stern, the largest of the state’s foreclosure mills. Last month, the U.S. District Court of Florida’s Southern District filed a lawsuit against this firm on the grounds that they “pursued foreclosures for lenders that didn't own the debt on the homes” and also foreclosed on more than 20 homes before the proper date.