Foreclosure documents back allegations of overcharging

Oct 27, 2010

The following article was published in the Tampa Tribune on October 27, 2010: 

Foreclosure documents back allegations of overcharging

By Shannon Behnken

Internal files from a company used by Florida’s largest foreclosure law firm provide more detail about recent allegations that lenders were overbilled and lawsuits were served to people who don’t exist.

In some cases, thousands of dollars in process fees were billed on a single property to multiple people, according to documents obtained by The Tampa Tribune.

Such fees for service represent the first step in the foreclosure procedure employed by the law offices of David J. Stern, one of four “foreclosure mills” under investigation by the state. Florida’s attorney general is investigating the company for allegedly “fabricating” or “presenting false and misleading” documents. The firm delegates the chore of serving notice to homeowners that a lender is foreclosing on their property to two companies. Miami-based Gissen & Zawyer Process Service, known as G&Z, is one of those companies.

Internal documents and billing records at G&Z back up sworn statements by former employees at the company and at Stern’s firm that accounts were charged for notice of service to people who don’t exist. Typical service fees in a foreclosure suit range from $45 to $300, industry experts say, but in some cases, G&Z’s bills for service on a single property reached $1,200 to $5,000. In one case reviewed by The Tampa Tribune, $5,000 was charged to serve 46 defendants. Alan Rosenthal, a lawyer representing G&Z, said that because the homeowner had a common name, Luis Perez, anyone with a lien against a Luis Perez had to be served if the firm couldn’t rule out that person as the correct Luis Perez.

This is done, Rosenthal said, to make sure anyone with interest in the property is served, which is required by law. These are fees that lenders — and ultimately consumers must pay. Both companies say the practice is normal and shows due diligence in finding those with interest in a property, essential to get clear title. “The bills are an accurate representation of the papers served,” Rosenthal said.

Foreclosure defense attorneys and consumer advocates say Stern’s effort to find every party who must be served routinely results in bills for summonses for people who don’t exist. They also worry if the correct owner isn’t served, a lender could foreclose on the home, even though the distressed homeowner is trying to work out a loan modification. “This is driven by one thing,” said Ira Rheingold, a lawyer, a foreclosure expert and executive director of the National Association of Consumer Advocates. “And that’s charging as much money as humanly possible.”

Summons for nonexistent people

It’s up to the law firm representing a lender to determine who needs to be served in a foreclosure suit. The process server simply serves the papers, Rosenthal said.

Jeffrey Tew, a lawyer representing Stern’s law firm, said the office always prepares a summons for the homeowner, an unknown spouse, a Jane and John Doe and any company with a lien against the homeowner.

“When you file a foreclosure you don’t know who is involved with that property,” Tew said. “The law firm has an obligation to make sure the right people are sued.”

The result: summonses are drafted for people who don’t exist, and the process servers are paid anyway.

G&Z billing records obtained by the Tribune show the company billed for service even when their process server noted the parties weren’t found.

For example, in September 2009, process server Douglas Nelson served a homeowner in Pompano Beach. Even before Nelson arrived at the property, he knew the homeowner was not married. Even so, Stern’s firm issued papers to serve the “unknown spouse.”

In addition, records show G&Z also billed the account $45 each for a John Doe and Jane Doe, even though Nelson noted the homeowner lived alone. Nelson, an independent contractor, said G&Z paid him $5 for each attempted service.

Internal company invoices from three days last fall show G&Z served 60 to 80 people a day for more than $30,000 each day for service for Stern’s files. “There’s no way they could have that many legitimate papers,” said Liz Mills, a former process server for G&Z. “There were only three of us who worked the county I worked in.”

Attorney General Bill McCollum’s office has subpoenaed three employees in its probe of Stern’s firm. They said employees forged signatures and signed important documents without reading them.

Former senior paralegal Tammy Kapusta also testified that Stern’s office padded bills by requiring suits to be served to made-up parties, such as tenants A, B, C, D, E, F and G. ‘A complete mess’

Lenders often were billed for the service before it was completed, Kapusta said, and homeowners called daily to complain they weren’t served at all.

“Service was a complete mess,” she told investigators.

Kapusta reported the complaints to her boss, Cheryl Samons, who called it a “business decision” as to “whether the service was completed.” Kapusta and another former employee, legal assistant Kelly Scott, said they were directed to ignore complaints and move forward with the foreclosure.

It was a system designed to speed up foreclosures for Stern’s most profitable clients — major lenders and mortgage giants Fannie Mae and Freddie Mac, which the employees say Stern called his “babies.”

But in the haste to serve lawsuits, true homeowners may be missed and not find out about their foreclosure until too late, said Matt Weinder, a St. Petersburg lawyer. In some cases, homeowners think they’re working with lenders on a modification, only to learn a la firm has moved forward with the foreclosure, he said.

Homeowners who get loan modifications must pay the service fees to get their houses back, but even when the homes are lost to foreclosure, the fees are added to the homeowners’ judgments, and they may have to pay them later. Otherwise, taxpayers foot the bill through lender bailouts, Rheingold said. “It’s not even just that they added these fees,” he said. “It’s the fact that lenders didn’t spend one second helping people save their homes, and what that really does is hurt our communities.”

Mills, the process server who worked for G&Z for about six months, said she left the company because she was uncomfortable with its procedures. “When I signed my affidavit, I’d see the bill they sent to Stern’s office,” Mills said. “We’d all talk around the office that we couldn’t believe they were billing for all these people.”

Mills said she always was given paperwork for multiple parties to be served in a foreclosure case and never was able to locate all the parties. She also said she saw her name forged on documents and was asked to sign for service she didn’t carry out.

Rosenthal, the lawyer representing G&Z, said that’s not true.

“The company doesn’t sign affidavits of process for their process servers,” Rosenthal said. “The process servers sign their papers — every time.”

Law firms don’t have to charge for people who don’t exist, said Walter Butler, who owns a process service company in South Florida. He said the firms he works for issue summonses for unknown tenants and others only after the process server determines it’s needed.

“It might take a little longer,” Butler said. “But it saves the clients money, and it’s the right thing to do.”

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