Michael J. "Mike" Barker is the Managing Partner of the Business, Financial Services & Real Estate Division of Quintairos, Prieto, Wood & Boyer, P.A., which has offices in Florida, USVI, Georgia, Illinois, Kentucky, Michigan, Texas, Arizona, and California. He is a Jacksonville native and represents clients throughout Florida and the United States. Barker represents clients engaged in the default servicing, banking, mortgage lending and mortgage servicing, construction and development, and title insurance industries in both transactional and litigation matters. Barker can be reached at email@example.com.
From the standpoint of default servicing law firms, what is the state of the default servicing industry now with inventory near or below pre-crisis levels?
Observationally and from talking with others in the industry on our side of the aisle is that a number of traditional default law firms are in disarray. Many of these firms took on massive numbers of transfer files with little revenue left in them and now with diminishing new referral volumes they are not able to fund the staffing models to handle the existing number of files for which they are still responsible. Of course, on the other hand, there are other firms that are doing well and planned appropriately for the contraction. The firms that we believe will be left standing when the dust settles will be those that have well diversified practice and client bases and those that have revenue streams that are not significantly linked to one particular practice area. For example, while we have a very large and robust financial services practice area, that revenue comprises only 10 to 12 percent of the firm’s gross revenue. So even a significant drop in default legal services for our firm would not significantly impact the firm as a whole. As we move forward with the continued referral contraction, the overriding issue facing default servicing firms throughout the country will be financial stability.
How much of an effect did regulation have on foreclosure starts over the last two years?
That is difficult question to answer. I think it is pretty clear that the reduction in the number of foreclosure starts is directly related to the improving economy and ability of consumers to go out and refinance, obtain new loans, and purchase new homes. If anything, regulation from the judiciary, state, and federal regulators was an impediment to moving through the default inventory. Of course, regulation was needed, but it did slow down the process of moving the files.
What is your firm doing as far as diversification?
We have a broad range of litigation practices well outside the default servicing arena. Within the financial services sector, we not only focus on default legal services, but also focusing on our regulatory and compliance practices, and our transactional real estate and title insurance practice. As we see the default inventory continue to contract, what we are seeing is an expansion of a need for regulatory and compliance legal services. Now that the default crisis has passed, what we are seeing is a focus of regulation on mortgage originations and any financial services that are consumer facing. The need for regulatory compliance legal services will continue to expand as the regulators continue to ramp up and expand.