Real Estate & Property Law

‘Assembly Line’ Justice: Business Is Booming for So-Called Foreclosure Mills

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The subprime mortgage crisis has been good news for the law firms sometimes known as “foreclosure mills.”

Florida law firms that focus on foreclosure work are ramping up their hiring to cope with the big boom in business, the Tampa Tribune reports. In February alone, one law firm, the Florida Default Law Group, filed more than 400 foreclosure actions in just one county.

Private investment firms also see opportunity in foreclosures. They are buying up the back-office foreclosure-processing operations from big law firms and offering outsourced foreclosure help to lawyers, the story says.

The New York Times notes that foreclosure law firms are profiting from increased work, but they are also making mistakes as they deal with the huge workload. In some instances the law firms have charged improper fees or submitted erroneous affidavits. The firms often rely on paralegals to handle the work and it can be difficult for lawyers to properly review the huge volume of cases, one anonymous lawyer told the newspaper.

The story says these firms are paid by the number of motions filed in foreclosure cases, and as a result they “have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, some judges say.”

The Times spoke to Jeff Bohm, a bankruptcy judge in Texas, who said the fee structure “has fostered a corrosive ‘assembly line’ culture of practicing law.”

Among the largest firms representing lenders are Barrett Burke Wilson Castle Daffin & Frappier of Houston; McCalla, Raymer, Padrick, Cobb, Nichols & Clark of Atlanta, which is designated counsel to Fannie Mae; and the Shapiro Attorneys Network, a group of 24 firms.

One bankruptcy judge has estimated that Barrett Burke earns fees of up to $11.6 million a year.

Some judges are cracking down on law firms that make mistakes, according to the Times and a March article in the ABA Journal.

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