Banking Law

The troubles of the Law Office of David J. Stern have led to some headaches for other law firms: those who are trying to take the tens of thousands of foreclosure cases that Stern's firm was handling and to "transition" them to new law firms. The largest lenders who dumped Stern's firm have appointed "transition counsel," law firms whose task it is to find competent substitute counsel to step into the shoes of Stern's firm, only without being investigated by the Florida Attorney General while they handle the foreclosures. Apparently, the transition counsel are finding the going to be slow and frustrating, and so are attorneys on the other side.

But the replacement law firms haven't found it easy to find enough qualified law firms to take the work, and the transition has slowed a system already clogged with overwhelming numbers of cases. Some judges are not willing to delay cases due to the change in attorneys as Stern files are turned over to new lawyers. More and more counties are requiring in-person rather than telephonic hearings.

"We are very frustrated," said Thomas Ice, a defense foreclosure attorney with Ice Legal in Royal Palm Beach. "We're having all these problems setting hearings. We call up Stern's office and say, 'You haven't withdrawn from the case.' They just don't show up. Sometimes the judges will go forward, but many times they won't reset it. We don't want delays. We want resolution.

Equally frustrated are some of the judges.

According to a Nov. 23 hearing transcript obtained by the Daily Business Review, Edmund Whitson III, a Tampa-based Akerman attorney, pleaded with a Punta Gorda judge for a postponement on a 2-year-old foreclosure case, and the judge wasn't happy. Whitson explained his firm just took over the avalanche of cases "that have been pulled from David Stern's office." "We are now trying to digest and allocate resources to that many files on very, very short notice," he said. "I respectfully request and almost beg your honor to continue this." Circuit Judge George C. Richards responded: "What happens with every other case of David Stern's office that is set for trial? Am I going to have to continue every other one?" Replied Whitson: "Your honor, I can't speak to those. Our office is essentially trying to act as transition counsel right now to find other law firms to handle it."

The linked article is from Law.com, so, naturally, there's much discussion about some law firms going after the work, while other law firms disdain such "high volume, low paying" work. While I don't handle residential loan foreclosure work, I've been contacted by some attorneys as a result of my blogging activities over the past few years who are willing to do such work and who believe that they've been unjustly denied the work by Freddie Mac and Fannie Mae. Instead, as is obvious from the linked article, Fannie and Freddie chose to use a very small number of foreclosure lawyers in Florida, and are now seeing the consequences of concentrating so much work in one firm. If they'd spread it around more, they wouldn't be in the bind they're finding themselves in at present.

You have to ask the obvious question: how did one foreclosure firm get to the point that it handled so many cases for so many lenders that transition is such a painful process for all concerned? I'll bet there might be a movie-of-the-week in the answer to that question.