A Colorado law firm specializing in foreclosures has added millions of dollars to its profits by inflating the amount it charges homeowners for serving them with pieces of paper that explain their legal rights, according to a lawsuit that is supported by whistleblower testimony. Rather than the typical charge of $25 to $35, the firm has been billing homeowners $150 for posting the papers, leading to estimated profits of over $5 million.
In late July, Attorney General John Suthers (R) sued four firms, including the state’s second-largest foreclosure firm, Aronowitz & Mecklenburg, to compel compliance with his investigation into the posting fees and other inflated costs. Days after Suthers filed the suit, a former A&M; attorney named Susan Hendrick testified that the firm not only inflated fees but destroyed documents proving they had done so in order to thwart Suthers’ investigation. Law firms specializing in foreclosure processing played a key role in the chain of fraudulent and abusive behavior that lead to last year’s much-criticized foreclosure fraud settlement. “In states that require judges to vet a foreclosure, law firms execute affidavits certifying a number of facts key to the foreclosure case,” ProPublica explained in 2010, but those same firms “have been known to foreclose first and finish the paperwork later.” One review suggested as many as a quarter-million Americans lost their homes based on such erroneous or even nonexistent paperwork, often wrongly validated by lawyers who had never seen the documents.
But the settlements meant to redress these widespread abuses have instead protected the mortgage industry while distributing minuscule checks to wronged homeowners. They have also failed to stop banks from employing abusive practices.