By Katy Stech
A New Jersey law firm that helped Wells Fargo Bank N.A.
foreclose on thousands of homeowners has sued the lender, saying
the bank's delayed efforts to fix its robo-signing problems led the
law firm to collapse.
Lawyers for the Zucker, Goldberg & Ackerman law firm, which
laid off most of its 335 workers last year, are accusing Wells
Fargo of taking several years to comply with a 2010 New Jersey
Supreme Court order that called for lenders to show that they were
properly submitting mortgage details before foreclosing on a
property.
The order, which required banks to submit their internal
foreclosure policies, paralyzed foreclosures throughout the state.
The average time for the foreclosure process -- from filing the
lawsuit to a sheriff's sale -- grew from about 200 days to about
1,000 days, according to documents filed in U.S. Bankruptcy Court
in Newark.
Wells Fargo's delay in responding to the court order caused
financial problems for Zucker, Goldberg & Ackerman, according
to the lawsuit. Under its agreements with mortgage lenders, the law
firm would advance most of the foreclosure-related expenses and be
reimbursed later, usually after a judgment or sale, court papers
said.
"[Wells Fargo officials] were incapable for a very long period
of time of complying with what the New Jersey Supreme Court said
they should have been doing all along," said Daniel M. Stolz, a New
Jersey lawyer who put Zucker, Goldberg & Ackerman into
bankruptcy on Aug. 3, 2015.
The lawsuit also states that Wells Fargo has refused to pay more
than $2.5 million for work that Zucker, Goldberg & Ackerman
did. Wells Fargo hired the law firm to file court pleadings, ensure
compliance with state and federal regulations and research
information such as ownership, payment history and title history
for each case, according to court papers.
Wells Fargo spokesman Tom Goyda said the bank disagrees "with
the claims regarding fees owed to the firm" and said that the
lawsuit's other allegations "should not be viewed as credible."
U.S. Bankruptcy Court Judge Christine Gravelle set a Dec. 21
hearing on the lawsuit.
The lawsuit, filed Friday, is part of Mr. Stolz's efforts to
collect money to repay roughly $30 million of the Zucker, Goldberg
& Ackerman law firm's debts.
Law firm officials said in earlier court papers that the
mortgage crisis, aside from causing foreclosure delays, also "gave
rise to onerous new regulations on the lenders, which the lenders
passed along [to the law firm]."
"Because foreclosure law is significantly impacted by economic
conditions, government regulations and the condition of the lending
industry, it has always been difficult for [the law firm] to
control its own destiny," Zucker, Goldberg & Ackerman officials
said.
Zucker, Goldberg & Ackerman is one of several high-volume
law firms that worked for the banks and stumbled after consumer
advocates and government regulators questioned the mortgage
industry's foreclosure practices amid the crisis. In 2012, five of
the nation's biggest banks agreed to a $25 billion national
foreclosure pact to settle accusations of improper practices, such
as "robo-signed" documents and otherwise flawed court papers.
In March 2013, a Georgia-based foreclosure processor called
Prommis Solutions LLC filed for chapter 11 protection and later
sold some of its operations to a competitor.
The 710-worker firm, was hired by law firms and mortgage
servicers to keep track of mortgages as they go through the default
cycle, grew rapidly after opening in 2006, its lawyers said in U.S.
Bankruptcy Court in Wilmington, Del., at the time of the filing.
But business slowed once federal regulators and state attorneys
general began investigating the mortgage industry's "robo-signing"
scandal.
"Residential mortgage default resolution processors, including
[Prommis Holdings and its affiliates], experienced a significant
deceleration of revenue recognition and, thus, decline in
business," Chief Executive Charlie Piper said in court papers.
The Butler & Hosch law firm shut down in May 14, 2015, and
laid off nearly 700 lawyers, paralegals and back office staff,
according to federal lawsuit that some workers filed over unpaid
wages and violations to federal layoff noticing rules.
The Orlando, Fla., firm typically handled between 50,000 and
60,000 foreclosures filed in 27 states, according to the lawsuit.
In an email made public in court papers, Chief Executive Officer
Robert Hosch said the company "grew too fast."
Write to Katy Stech at katherine.stech@wsj.com
(END) Dow Jones Newswires
October 19, 2016 17:23 ET (21:23 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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