Fore­clo­sure lawyers say they were tracked closely

The Denver Post - - NEWS - By David Migoya

The Den­ver law firm that fore­closed on more Colorado home­own­ers than any other could not have padded its billings be­cause the banks and fed­eral mort­gage in­sur­ers it rep­re­sented mi­cro­man­aged nearly ev­ery as­pect of the process to en­sure the speed­i­est out­come, one of its own­ers said Wed­nes­day.

At the height of the mort­gage cri­sis, the Cas­tle Law Group han­dled as many as 500 new fore­clo­sures a week in which ev­ery fee, cost and ex­pense as­sessed by at­tor­neys — down to the num­ber and value of stamps used to mail doc­u­ments — was scru­ti­nized by their clients, part­ner Caren Cas­tle tes­ti­fied in a civil trial ac­cus­ing her and oth­ers of fleec­ing con­sumers with un­fairly high prices.

Those clients — from Bank of Amer­ica and Chase to Wells Fargo and Wash­ing­ton Mu­tual — and fed­eral in­sur­ers Fan­nie Mae and Fred­die Mac wanted only one thing, Cas­tle said: clear ti­tle to the prop­erty as quickly as pos­si­ble.

“We had to pro­vide ev­ery sin­gle doc­u­ment as they were filed in court,” Cas­tle, 61, ex­plained in re­sponse to ques­tions from her at­tor­ney, Larry Pozner. “In the old days, I’d send a let­ter to the (bank), … but that went com­pletely gone. Ev­ery sin­gle step of the way, our clients mon­i­tored it all, and it was minute by minute.”

Pozner was lay­ing the ground­work to show that Cas­tle and the hun­dreds of at­tor­neys the firm em­ployed could not have in­serted any il­le­git­i­mate or ex­ces­sive ex­penses to pad their billings — as the Colorado at­tor­ney gen­eral as­serts in its law­suit — with­out risk­ing large fi­nan­cial losses should those bills be re­jected. The state filed the civil law­suit against Larry Cas­tle, his at­tor­ney-wife, Caren, and the law firm they built into a fore­clo­sure em­pire that nearly cor­nered the in­dus­try in Colorado.

“I might be one of 10 firms in the state that rep­re­sented a client,” Caren Cas­tle rea­soned. “They could see doc­u­ments from all the firms and see that they were all in line or ex­traor­di­nar­ily high or low.”

The at­tor­ney gen­eral — now Cyn­thia Coff­man, but John Suthers when the in­ves­ti­ga­tion be­gan and the law­suit was filed — claims the Cas­tle law firm, now closed, con­spired to raise a va­ri­ety of small-tag costs and fees in or­der to max­i­mize its re­turn on fore­clo­sure cases.

The law­suit fo­cuses on three key charges the Cas­tles of­ten in­cluded in their billings: a pair of le­gal post­ings at the ad­dress in fore­clo­sure that each cost $125, and a doc­u­ment at­tor­neys signed al­low­ing their client to fore­close with­out hav­ing to pro­duce the orig­i­nal mort­gage.

The at­tor­ney gen­eral al­leges the $125 charges were schemes to profit off the mort­gage cri­sis since the same work to post evic­tions cost only $30, and those who ac­tu­ally did the work were paid pre­cisely the same for each: $10.

The signed doc­u­ment, called a state­ment of qual­i­fied holder, was a $50 fee that ap­peared on nearly ev­ery fore­clo­sure bill in Colorado, but state at­tor­neys ar­gue it was part of the reg­u­lar process in bring­ing a fore­clo­sure.

And be­cause the na­tion was mired in mil­lions of de­faulted mort­gages — Colorado at one time led the na­tion in the num­ber of fore­clo­sure fil­ings — things moved at such a blis­ter­ing pace that no one no­ticed the bill-pad­ding, the law­suit al­leges.

Yet Cas­tle said it was vir­tu­ally im­pos­si­ble to sneak any­thing by the banks, which watched their ev­ery move.

And if they had tried, they would have risked be­ing held li­able not just for the small as­sess­ment, but the en­tire cost of a fore­clo­sure, which could tally into the thou­sands of dol­lars. Any mis­take was pe­nal­ized heav­ily, so lawyers worked hard to get things done cor­rectly and quickly, she said.

“There were in­stances where we had to pay off a loan en­tirely — the largest was $250,000 — and we did what we could to be re­im­bursed” from the com­pany they had hired that made the costly er­ror, she said.

The state says the Cas­tles had hid­den fi­nan­cial in­ter­ests in a com­pany that posted the le­gal no­tices. The Cas­tles in­di­rectly shared in some of the post­ing com­pany’s prof­its through a com­plex own­er­ship struc­ture pros­e­cu­tors say was de­signed to mask the kick­backs.

Changes to Colorado’s fore­clo­sure laws — all of them brought to the leg­is­la­ture by the col­lec­tion of pub­lic trustees across the state — added a num­ber of pro­cesses that at­tor­neys in turn charged to do.

The Cas­tles have said they were merely a con­duit for the costs, and that any up-charge was from the post­ing com­pany. Ad­di­tion­ally, they said they held lit­tle, if any, fi­nan­cial in­ter­ests in the af­fil­i­ated busi­nesses, cer­tainly not enough to reap the mil­lions of dol­lars in il­le­git­i­mate prof­its state lawyers ac­cuse them of pock­et­ing.

State at­tor­neys say con­sumers ul­ti­mately paid the bills: ei­ther in­vestors try­ing to buy the home at fore­clo­sure sales, home­own­ers try­ing to stop the auc­tion or banks re­coup­ing the losses from tax­payer-backed fed­eral in­sur­ers.

The case, be­ing heard by Den­ver District Judge Mor­ris Hoff­man, is ex­pected to last three weeks.

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