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As we discussed recently, the Colorado Attorney General and, apparently, law enforcement officials in other states, are investigating potentially explosive allegations that foreclosure law firms have been inflating fees for years. The Denver Post's David Migoya has unearthed additionally seedy conduct by foreclosure lawyers in Colorado that's related to Colorado's unique "public trustee" foreclosure process.
At the risk of losing their homes if they didn't, scores of Colorado homeowners struggling to avoid foreclosure in the past year were each forced to pay hundreds of dollars in lawyer charges for phantom court cases against them, a Denver Post investigation has found.
Those charges, which homeowners in the state's largest counties unnecessarily had to pay to bring their property out of the foreclosure process, totaled more than $40,000. The law firms billed the charges to be reimbursed for having filed the lawsuit and posted a legal notice about it, records show.
Although the fees were very real, the cases and the notices were not.
The Post found 126 foreclosures since January 2012 in which homeowners in 11 counties were told by county public trustees to pay the charges associated with the filings or the foreclosure would continue. But, in fact, no foreclosure lawsuit was filed.
The Post also found that the practice has been going on at least since 2006, according to random checks of prior years' District Court and county public-trustee records.
[...]
The charges — sometimes as much as $300 to file or "docket" a case and $150 to post the notice about it — appear on bills that lawyers submitted to public trustees after a homeowner formally requested the amount necessary to stop their foreclosure.
Those bills, called cure statements, detail the expenses lawyers hired by a foreclosing lender say they've paid or incurred, along with their legal fees to handle the case, the amount a homeowner has fallen behind on their mortgage, interest, late fees and the costs of the county public-trustee's office.
Homeowners are instructed to pay the whole amount by a certain date — no partial payments are allowed — if they want the foreclosure process to end. Otherwise, it continues, and they risk losing their home to public auction.
As Migoya points out, Colorado's public trustees, who conduct the foreclosures under that state's foreclosure system, are forbidden by law from questioning the lawyers' cure statements. Instead, the law relies on the integrity of the "officers of the court" to not file false statements of charges. While some of the foreclosure attorneys have alleged that their statements of fees are merely "estimates," the linked article quotes a Denver judge as flatly ruling that they are statements of fact, not opinion. If that's the case, then the "phantom" foreclosure charges are false statements made to the court, and that's serious business.
If these preliminary investigations continue and eventually bear fruit, there are going to be some lawyers in Colorado who are in deep water without a life jacket. I hope they're all strong swimmers.
