Fannie Mae Freddie Mac cut ties to David J. Stern Florida law firm

16 11 2010

Mortgage giants Fannie Mae and Freddie Mac have terminated relationships with a Florida law firm under investigation for fabricating documents to speed up foreclosures.

Fannie Mae and Freddie Mac announced they have removed files from the law offices of David J. Stern and making arrangements to transfer them to other Florida law firms, company representatives said.

“We’re taking the documents to protect our interests, preserve the integrity of the documents, and protect the rights of borrowers,” said Doug Duvall, a spokesman for Freddie Mac.

This unusual step follows both Fannie and Freddie’s decision last month to stop referring new foreclosures to Stern’s office. Florida Attorney General Bill McCollum last month released sworn statements from former employees who alleged illegal handling of files.

This move terminates Stern’s position in dealing with all on-going foreclosures. Documents pertaining to homes already taken back by Freddie were also are being removed from Stern’s office, Duvall said.

Kelly Scott, a former legal assistant at Stern’s office, testified to the attorney general that current employees were concerned about what was happening to documents. Former colleagues, she said, saw an 18-wheeler truck drive away with documents and allegedly take them to a Stern office in Orlando.

Freddie planned to take its files from all Stern offices, Duvall said.

Stern called Fannie Mae and Freddie Mac his “babies,” Scott told the attorney general. Both agencies also pressured the firm to move cases along faster and gave the firm a quota, Scott said.

Scott also testified that employees were given jewelry, cars and houses from the firm in exchange for altering and forging key documents used to process foreclosures.

The two government-sponsored lending giants said they would audit Stern’s files after the release of Tammy Lou Kupusta’s testimony in early October.

Scott and Kupusta painted a picture of a secret system designed to speed up the foreclosure process. Attorneys and staff members forged signatures, changed dates and passed around notary stamps, the women say in interviews with attorney general’s staff.

The women described long tables where employees would sign 1,000 documents a day without reading them.

Last week the law offices of David J. Stern and an associated company starts laying off 70 percent of its combined staff. The terminations come two days after mortgage giants Fannie Mae and Freddie Mac severed ties with the firm.

In the e-mail to employees, Stern said the referral of new business has decreased by over 90 percent in the last six months. “While we are doing everything possible to guide the company successfully through these difficult times, these developments mandate that we take immediate action to align the business with current realities,” Stern said in the e-mail.

The firm originally employed about 1,000 people.

The law firm, which handles Florida foreclosures for major lenders, is under investigation by the Florida Attorney General for sloppy work and fabricating key documents used to complete foreclosures.

One employee testified that Stern had relationships with people inside Fannie and Freddie who would tip him off before routine audits. Problem documents were then hidden in conference rooms until the auditors left, the employee told the attorney general.

After the testimony was released, Fannie and Freddie sent auditors in to examine files. Both companies announced they terminated their relationships with the firm and were removing all of their files from Stern offices.

Two weeks ago, Stern’s mortgage document processor DJSP Enterprises Inc. said it would terminate an additional 198 employees as the volume of work shrinks. That company has laid off a total of 300 people, the company said.

DJSP was spun off into a publicly traded company by Stern. The company handles work for his law firm.

Source: The Tampa Tribune



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