Christine Stuart photo

As part of an ongoing investigation, Attorney General Richard Blumenthal said Monday that his office has written three major mortgage lenders in the state to determine how they chose the law firms and the state marshals when filing foreclosure lawsuits in the state.

He said the concern is that a select group of law firms and state marshals are “spinning foreclosures into fortunes on the backs of homeowners driving them into deeper economic despair.” He said the homeowners are the ones that pay the fees and costs, which have the potential to exacerbate their financial problems.

“Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices—wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks,” Blumenthal said.

Blumenthal said his office has received complaints that consumers are not receiving proper foreclosure notices and are being charged excessive fees in connection with foreclosure actions.

In letters to Lender Processing Services Inc., Freddie Mac, and Fannie Mae, Blumenthal requested the identity of all the law firms they have used for foreclosure actions since 2007, the criteria they use in selecting those law firms, the number of cases they’ve filed, an itemized list of all the fees paid, the number of complaints filed where a homeowner did not receive a notice of the foreclosure action, and copies of all the agreements they have with law firms.

Blumenthal said the law firm of Hunt Leibert Jacobson paid one marshal more than $2 million, while another law firm, Bendett & McHugh, paid that same marshal more than $700,000 last year to serve foreclosure actions.

He said that fact alone raises questions about whether this one marshal could physically do this work, or if some of the work was farmed out to individuals who are not licensed to serve these documents.

In an effort to crack down on state marshal fees, the City of New Haven is in the process of adopting a bidding process for its work in this area. The city put out a request for proposals for marshals who may be willing to take a fee that is less than the state maximum. Blumenthal said he advised the New Haven Board of Alderman that they could negotiate a lower rate with the marshals.

“We’d advise anyone to seek the best possible price for serving of a legal document,” Blumenthal said.

However, there’s no current economic incentive for these law firms to be seeking the best possible price for the marshals service because the cost is passed onto the homeowner.

“There’s no economic incentive for them to be seeking the best possible cost at the present,” Blumenthal said.

But the lenders who have a duty to the public trust should consider that “the cost of the whole foreclosure process may severely inhibit the ability of homeowners to stay in their homes, even with the best of intentions on both sides,” Blumenthal said.