Foreclosure King Falls from Grace
Freddie Mac and Fannie Mae, the latter of whom named him Attorney of the Year two years running, also hired David Stern, initially turning a blind eye to inconsistencies in notarized documents that hailed from his marble-floored headquarters near Miami. Now the banished 50-year-old Stern, after building a nearly $300 million business, is an outcast in hiding with possibly no remorse for the lives of thousands whose homes were fraudulently rubber stamped away from them.
Stern built his wealth on robo-signing, which also caused the fall of his foreclosure kingdom by year end 2010, with his glass office building in Plantation, Fla., meeting the fate he pushed on so many homeowners -- it received a notice of default after one of its subsidiaries failed to pay rent in November, according to a regulatory filing.
But what was the rise before the fall? In 2009 his law firm pushed 70,382 foreclosure cases
in what some have called a "foreclosure supermarket." Revenue swelled from $41 million in 2006 to $260 million in 2009, according to an SEC filing. To reach that magnitude, some of his employees signed nearly 500 foreclosures per day in exchange for gifts of jewelry, houses and sport utility vehicles.
One of Stern's employees told the Florida attorney general's office that the firm's chief operating officer, Cheryl Salmons, at one point was signing at least 1,000 affidavits per day, reported Tampa Bay Online.
To move things along, the attorneys and staff members forged signatures, changed dates, foreclosures, even when they knew the homeowner had not been properly notified of the lawsuit, according to reports from the AG's office, which only confirmed for homeowners that lenders didn't care about their rights just to get their home.
After all, the more the staff foreclosed, the more the company made. And the employees were duly compensated for their hard work, which entailed only spending about five minutes per case in sessions they called "rapid docket," according to the transcript of an interview the attorneys general office had with former Stern employee Kelly Scott.
For "rapid docket," she said that junior staff would lay out a bunch of files that were already notarized side by side on a long conference table, about 15 feet by 5 feet. Salmons would come in twice a day and sign them all, about 500 per spurt. (In other words, a notary public never witnessed her signature.)
Sometimes paralegals even would sign Salmons's signature for her "because most of the time she was very tired, exhausted from signing her name numerous times per day," said Scott, who added that Salmons was also responsible for signing some office personnel documents, such as vacation request approvals.
In exchange for Salmons's carpal-tunnel-inducing signature marathons, the firm allegedly would routinely pay her personal mortgage, her electric bills and her cell phone bill, and even awarded her with a new BMW sport utility vehicle every year. For employee David Vargas, Stern allegedly purchased him a house, a car and a cell phone. Other employees received jewelry, according to Scott in the PDF transcript.
The "breakneck pace" at which eventually as many as 1,000 Stern employees processed foreclosure filings, stems from how law firms get paid, reported Mother Jones. Rather than billing hourly, they were paid based on a predetermined flat fee of about $1,000 for each foreclosure they closed-not including payments for add-on side services. As a result, said legal experts speaking to the magazine, even families who could afford to make good on their mortgages were steamrolled under illegal foreclosure machinery.
Know how you'd hear about a homeowner saying a lender agreed to a payment plan or loan modification, but their door was slapped with eviction papers anyway? Well, that's because foreclosure mills often forged ahead, shoving cases through the courts before the workout deals were sealed.
But eventually, officials caught up with Stern as matters came to light in the media, as well as when judges who were to approve the foreclosures started questioning shoddy paper work. For example, A Florida notary's stamp is valid for four years, and its expiration date is visible on the imprint. But there were dozens of documents that clearly had been back-dated, as the notary stamp used on some would not have even been issued until months later, in some cases nearly a year after the foreclosures were filed.
"This meant Stern's people were foreclosing first and doing their legal paperwork later. In effect, it also meant they were lying to the court-an act that could get a lawyer disbarred or even prosecuted," wrote a Mother Jones muckracker who personally reviewed several of the documents to verify the allegations.
But before all came to a screeching halt, Stern the man, who earned his Juris Doctorate from South Texas College of Law in Houston, Texas in 1986, at one point was so wealthy he owned a Bugatti and had purchased at least $60 million in property, including a gated 16,000-square-foot island compound he purchased for $15 million on the Atlantic Intracoastal Waterway, where he docked his even more expensive $20 million, 130-foot Mangusta yacht named Misunderstood, which replaced his previous 108-foot Mangusta.
Before his fall from grace, Stern also had snapped up his next-door neighbor's property for $8 million and tore down the house to make way for a tennis court. The home is so grand that it's a site on a water-taxi tour of the area's great estates, along with the manses of Jay Leno and billionaire Blockbuster founder Wayne Huizenga, reports Mother Jones. He also purchased four Ferraris, four Porsches, two Mercedes-Benzes, a Cadillac, in addition the Bugatti.
After Fannie Mae and Freddie Mac-as well as several lenders stopped sending foreclosure cases Stern's way in October, his publicly traded paper-processing division, DJSP Enterprises, wallowed around $1.30 a share, down from $6 in June and $14 earlier. As of the first week of February, it traded for about 50 cents on the Nasdaq exchange, reports the New York Times.
Sheree R. Curry, who has owned three homes but never a Bugatti, is a three-time, award-winning journalist who has covered real estate for six years. During her 20-year career, her articles have appeared regularly in the Wall Street Journal, TV Week, and Fortune. She's been with AOL Real Estate since 2009 and seeks a book publisher -- or at least a lender who'll give a reasonable mortgage rate to a self-employed mom.
For more on mortgages and related topics see these AOL Real Estateguides:
- How to Get a Low Mortgage Rate
- Mortgage Jargon in Simple Terms
- How Much Home Can I Afford?
- How to Buy Foreclosures