AG: Examine Why Few Law Firms Handle Bank Foreclosure Listings

by Simon Lindsay on General

The dominance of two law firms on handling proceedings for properties on bank foreclosure listings has not escaped the attention of Connecticut Attorney General Richard Blumenthal.

He ordered government-controlled mortgage financiers, Federal National Mortgage Association and Federal Home Loan Mortgage Corp. and Lender Processing Services (LPS) to provide him with information on why only two law firms handle foreclosure proceedings in Connecticut.

Blumenthal is responding on complaints he received from consumers who claimed that they were not given proper notices of foreclosures from marshals. He said that troubled homeowners are being charged high fees on foreclosure proceedings and some marshals have received excessive fees linked to properties on bank foreclosure

According to Blumenthal, dominance of several law firms on foreclosure service has resulted to complaints of illegal or improper practices such as assigning work load to non-marshals, forgery, failure to serve papers and receiving bribes. He pointed out that these law firms in question are making a profit out of properties on bank foreclosure listings.

In his letters to Fannie Mae, Freddie Mac and LPS, Blumenthal asked them to disclose the criteria they are using to choose law firms that will handle foreclosure proceedings for them in the state.

He cited in his letter the law firms of Bendett and McHugh and Hunt Leibert Jacobson. Both law firms filed majority of foreclosure cases which are now clogging courts in Connecticut.

Furthermore, these law firms have allegedly passed the work of serving foreclosure notices to few select state marshals. According to complaints, state marshal John Fiorello and his group received over $1.1 million in 2008 for serving notices of foreclosures to homeowners whose properties are on bank foreclosure listings.

Blumenthal pointed out the anti-competitive practice of focusing the mortgage foreclosure processing service on few state marshals and law firms.

Records showed that Bendett and McHugh and Hunt Leibert filed nearly 1,200 lawsuits monthly in 2008, with foreclosure actions accounting for 99 percent of the cases. Additionally, the two law firms allocated almost 50 percent of their process-serving operation to the group of Fiorillo.

Bendett and McHugh and Hunt Leibert are the only law firms in Connecticut named by Freddie Mac and Fannie Mae as designated counsel to handle foreclosure actions on properties on bank forclosure listings.