New York state is trying to lend troubled homeowners a helping hand, but foreclosure law firms are cutting it off at the wrist.
That’s the allegation in a new class-action lawsuit brought by MFY Legal Services against the law firm Steven J. Baum, which accounts for 40 percent of all foreclosures in New York state.
The suit alleges that Baum and other law firms are initiating foreclosures against thousands of New York City homeowners but deliberately delaying two other documents: an affidavit attesting to the accuracy of the foreclosure summons and complaint, and a request to begin a settlement conference that could lead to a loan modification.
These delays have wound up forcing an estimated 4,000 Brooklyn and Queens families into limbo since the accuracy-affidavit requirement was initiated last fall.
Late fees and charges continue piling up, and borrowers can’t connect with free housing-counseling and legal services. Seventy percent of NYC homeowners in foreclosure don’t have lawyers.
Hit by budget cuts and staff reductions, the courts may suffer another blow from this trend too, once thousands of stalled cases move ahead.
New York started requiring these affidavits after widespread robosigning — signing of hundreds of affidavits without verifying their accuracy — came to light.
“The intention of the court system to better protect customers after the robosigning scandal has been used by foreclosure law firms to further harm homeowners,” said MYF staff attorney Elizabeth Lynch.
This suit is another black eye for the Baum firm, which is under investigation by the state attorney general.
Baum declined to comment.
Legal experts say this latest wrinkle in the foreclosure mess is one more example of how the big banks behind it all cut corners to maximize profits, at homeowners’ and investors’ expense.
Foreclosure lawyers have to get accurate documents from mortgage servicers, which are often major banks.
But the banks haven’t devoted nearly enough resources to handling the huge volume of delinquent loans.
“Robosigning was all about speed, and once you actually have to do a foreclosure correctly, it takes more time,” says Alan M. White, professor at Valparaiso University School of Law.
“[But] the real holdup is coming from the mortgage servicers, and until we get servicers to do the job they have to do, we’ll be facing these kinds of delays.”