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One of New York's largest-volume foreclosure law firms has signed on to an agreement with the U.S. Department of Justice, requiring the firm to pay $2 million and change its foreclosure practices â€" a case that market observers say could set a national precedent.
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The law firm of ""Steven J. Baum, P.C."":http://www.mbaum.com/SJB/index.jsp has been the subject of a six-month investigation into whether the firm, on behalf of its lender clients, filed misleading pleadings, affidavits, and mortgage assignments related to foreclosure actions in New York state and federal courts.
Last Thursday, the firm's principal, Steven J. Baum, entered into ""a settlement agreement"":http://www.nylj.com/nylawyer/adgifs/decisions/100711baumsettlement.pdf to end the probe and resolve allegations brought forth by the U.S. attorney for the Southern District of New York.
In addition to the $2 million fine, the firm has agreed to ""extensively change"" its mortgage foreclosure practices, according to court documents.
The settlement specifically prohibits the Baum law firm from engaging in certain practices related to the Mortgage Electronic Registration Systems, Inc. (MERS).
MERS members contractually agree to appoint MERS as their agent on all mortgages they register. According to U.S. District Attorney Preet Bharara, until recently, employees of the Baum law firm had been assigning mortgages on behalf of MERS, even though they had no connection to MERS, which resulted in errors in legal filings in state and federal court.
Going forward, the firm is prohibited from executing any assignment of a mortgage as an ""officer"" or ""director"" of MERS.
[COLUMN_BREAK]Under the terms of the settlement, the Baum law firm has also agreed to inform the courts of the validity of mortgage assignments in pending foreclosure cases it is handling. That includes providing the courts with affidavits from the firm's clients attesting to the fact that they have the right to foreclose.
The firm has also consented to have ""experienced attorneys"" supervise the preparation of pleadings, and review and approve pleadings before they can be filed, according to the language of the settlement.
In addition, the Baum firm will implement a 12-24 month training program for its attorneys that includes an overview of the foreclosure process in the state of New York and a review of the litigation procedures that must be followed.
The firm must also immediately notify the Justice Department when objections are raised regarding the accuracy of court filings related to its mortgage foreclosure proceedings.
According to the U.S. District Attorney's office in Manhattan, the law firm of Steven J. Baum, P.C. ""acknowledges…that it occasionally made inadvertent errors in its legal filings in state and federal court, which it attributes to human error in light of the high volume of mortgage defaults and foreclosures throughout the state of New York.""
""In mortgage foreclosure proceedings, there are no excuses for sloppy practices that could lead to someone mistakenly losing their home,"" Bharara said in a statement. ""Homeowners facing foreclosure cannot afford to have faulty paperwork or inadequate evidence submitted, and today's agreement will help minimize that risk.""
Bharara says his settlement with the Baum firm does not preclude any other parties, including individual homeowners, from pursuing their own individual cases.
While officials with the Justice Department are negotiating a blanket settlement with major mortgage servicers to resolve allegations related to improper foreclosures, it looks as though attorneys that engaged in the same questionable practices will be targeted individually.
