The Latest Foreclosure Fallout Could Further Mangle The Legal System
As of about a week ago, the law offices of David J. Stern and the affiliated document processing company, DJSP, are slated to close at the end of the month, but for one of the largest foreclosure firms in the country, closing isn't as simple as locking the doors.
While the Attorney General is investigating Stern's office for fraudulent foreclosure practices, documents that filtered through the firm are muddled throughout courts all over the state. An article in the Bradenton Herald quotes 12th Circuit Chief Judge Lee Haworth saying that the backlog of foreclosure cases will become more severe once Stern's firm closes. Then, in what is arguably the best foreclosure analogy to date, Haworth told the Herald, "The foreclosure mills didn't throw a monkey wrench in the process -- they threw in a whole monkey."
By all indications, the monkey image holds true for courts state-wide.
As lenders who used Stern's firm find new legal representation, and courts, lenders, and homeowners paddle through the muck of questionable documentation, foreclosure filings have dropped rapidly in the past month. Because of this sharp decrease, our court system bears a predicted $8 million operating deficit. The budget is based on revenue projections that were unexpectedly not reached. "Our deficit is clearly and almost totally the result of mortgage foreclosure filings significantly dropping," Lisa Goodner, the state's court administrator told the Herald.
For some homeowners in foreclosure, there may be a silver lining. If a lender doesn't have a new attorney to replace someone from Stern's firm by the hearing, the foreclosure will be dismissed, therefore buying time for a homeowner to enter a mortgage modification or explore other options, Dawn Bates-Buchanan, a former managing attorney of Gulfcoast Legal Services' Bradenton office, told the Herald.
But for investors in DJSP, a publicly traded company, there is no consolation prize. The stock prices plummeted like a boulder off a cliff last fall, when news broke of Stern's allegedly fraudulent foreclosure practices. The falling prices eventually gave way to another by-product of the firm's downfall -- DJSP's voluntary delisting from Nasdaq.
According to the Sentinel:
Nasdaq officials notified DJSP in December that it was in danger of being delisted because its stock had fallen below $1 for the prior 30 days, according to a company SEC filing. DJSP also failed to meet Nasdaq listing requirements concerning its market cap, which must be at least $15 million.
Even with Stern's firm scheduled to close, the foreclosure dominoes are still falling, and there's no clear indication of where they will end or what will stop the cycle of dysfunction.
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