South Florida at center of growing foreclosure legal mess

10/23/2010 © South Florida Sun-Sentinel

Does this sound familiar? South Florida lawyer from humble origins presides over a rapidly expanding business empire. He spends lavishly along the way, with a fleet of expensive sports cars, million-dollar waterfront properties and yachts, including one named “Misunderstood.”

He has a trusted female aide, whom former co-workers say got generous perks, including a luxury car, a home and personal bills paid by the firm.

No, I’m not talking about Scott Rothstein, the attention-seeking Ponzi schemer.

I’m describing David J. Stern, a publicity-evading attorney headquartered in Plantation who has gotten rich from America’s mortgage meltdown.

Stern, who hasn’t been accused of any wrongdoing, doesn’t deal in fictitious legal settlements but painfully real foreclosures.

Tons of them.

His firm has processed foreclosures for the nation’s biggest banks, along with government-sponsored mortgage companies Fannie Mae and Freddie Mac, pumping more than 100,000 cases through the foreclosure pipeline the last two years. His law firm and supporting companies grew from 250 employees to more than 1,100.

A pair of Royal Palm Beach attorneys representing delinquent homeowners began looking at Stern’s operations last year, and questions about the firm’s procedures have been piling up since.

Now Stern has become an overnight villain of the foreclosure crisis. He’s being investigated by The Florida Bar and Florida Attorney General Bill McCollum.

Sworn depositions of former Stern workers released by McCollum paint an unflattering portrait of an overwhelmed outfit more interested in ruthless speed than due process.

They described a frantic environment where legal corners might have been cut, with people signing documents on behalf of others and possibly manipulating dates and misrepresenting proper notification of lawsuits to homeowners.

“Everyone was pumping out as many files as they could,” Kelly Scott, a former assistant to operations manager Cheryl Samons, told investigators earlier this month.

She described reams of foreclosure documents spread across a conference table daily, with paralegals authorized to forge Samons’ signature. “Most of the time she was very tired, exhausted from signing her name,” Scott said. “You had to understand it was more than five hundred files that she’s signing morning and afternoon…a thousand a day.”

Scott also said Samons got generous perks from Stern, including a leased BMW and personal bills paid by the company.

Thanks to troublesome practices at firms like Stern’s, some banks have temporarily halted foreclosures across the country, including in Florida, where 20 percent of homeowners are behind on mortgages.

The ongoing mess might mean years’ more turbulence for South Florida’s ailing real estate market.

I couldn’t reach Stern or his attorney, Jeffrey Tew, for comment. Earlier this week, Tew told Bloomberg News, “David’s wealth is a reflection of his acumen and the tremendous volume of foreclosures…He started from scratch and has built a wonderful legal practice and has made a lot of money. That’s the American dream, isn’t it?”

In September, Stern, 50, told The New York Times: “I can’t speak for the other firms, but I can assure you there has not been submission of fraudulent documents…We have done nothing wrong and are going to cooperate fully.”

Flush with foreclosure cash, Stern has bought a $14 million waterfront mansion in Fort Lauderdale, an $8 million mansion with a tennis court on Hillsboro Beach, and a $6 million condo in a Fort Lauderdale high rise in the last two years. He also bought a Bugatti, four Ferraris and four Porsches, and a yacht that a friend told the New York Times that he considered naming Su Casa es Mi Casa (Your House is My House), something Stern denied to Times reporters.

In Florida, foreclosures must be approved by judges, and the housing meltdown has caused a horrific backlog in state court. Special divisions with retired judges have been set up to clear the caseload. Critics wonder if expediency is also trumping the rights of homeowners in the courts.

“I’ve represented murderers where I’ve gotten more due process than in foreclosure cases,” said Davie attorney Michael Wrubel, a former criminal attorney who now specializes in foreclosure defense. “The volume is so heavy, mistakes are made.”

He said Stern’s firm exhibited questionable ethics, often reluctant to re-open foreclosure judgments that were based on erroneous documents.

He called the firm’s methods, as described in the worker depositions, “Outrageous, and stupid as well…Did they really think they were going to get away with this forever?”

Banks try to dismiss the latest concerns as paperwork glitches and technicalities, and Wrubel acknowledges that it’s hard to engender sympathy for delinquent homeowners.

“In foreclosures, nearly every client is guilty of being in default,” Wrubel said. “But the issue is can you prove that the (bank) lawfully owns the note and has the right to foreclose?”

Because so many mortgages are sold and divided among intricate pools as investments, he said the answer isn’t nearly as clear-cut as banks want you to believe.

But with so many parts of the system drowning in the foreclosure flood, who’s got time for intricacies like the law?

Michael Mayo can be reached at mmayo@sunsentinel.com or 954-356-4508.

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