Foreclosure lawyers say they were tracked closely
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.