Massachusetts foreclosure law firm latest in investigator crosshairs

Introduction

A law firm with connections to the attorney at the center of a Florida foreclosure scandal is under investigation by the Massachusetts attorney general’s office for unlawfully evicting tenants of bank-owned properties.

The investigation came to light on Monday, when Harmon Law Offices in Newton, Mass. responded in state court to a demand by investigators in Martha Coakley’s office to produce documents related to several foreclosures. (Hat tip to Stopforeclosurefraud.com, which first published a copy of the complaint on its web site).

The firm, led by Mark P. Harmon, represents banks in foreclosure proceedings against homeowners. That includes serving eviction notices to tenants living in foreclosed homes. A Massachusetts law that makes it more difficult for a bank to evict a tenant for the purposes of marketing and selling a home took effect on August 7, 2010. The Dodd-Frank law also extends additional protections to tenants of foreclosed homes.

In its complaint, the Harmon firm says that the attorney general’s office is improperly investigating it for evictions that it processed before August 7. Just one of the evictions the AG is investigating came after that date, the firm says.

According to an analysis of the law by attorneys at Partridge Snow & Hahn, a law firm with offices in Massachusetts and Rhode Island, the law isn’t clear on whether it is to be applied retroactively to evictions in process as of the effective date.

As Financial Reform Watch previously reported, lawyers in Florida, New York, and Maryland are under scrutiny for a raft of allegedly fraudulent behavior, including backdating documents and forging signatures, in an effort to ram as many foreclosures through the court system in a little time as possible.

Mark Harmon has close ties to David J. Stern, whose firm is at the center of the mess in Florida. Until recently, Harmon was on the board of directors of DJSP Enterprises, Inc., which advertises itself as the largest provider of processing services for the mortgage and real estate industries in Florida. Its principal customer: The Law Offices of David J. Stern.

On Tuesday, Harmon resigned from DJSP.

According to Mother Jones, which first reported on the alleged fraud at the Stern law firm, DJSP has laid off nearly 100 employees, and Stern has relinquished the chairmanship of the board of directors.

In December 2008, the Harmon firm was named along with a class action lawsuit handful of financial institutions, including Deutsche Bank, for foreclosing on hundreds of properties where it was unclear whether the banks actually held the title. Allegations like these have recently threatened to engulf the housing industry in a wave of lawsuits. Sheila Bair, the chairman of the Federal Deposit Insurance Corp., said this week that litigation by the owners of foreclosed houses could “ultimately be very damaging to our housing markets.”

Federal regulators are investigating foreclosure practices at large financial institutions to see if flawed policies are leading to improper foreclosures, Federal Reserve Chair Ben Bernanke said Monday at a housing finance conference.

Attempts to reach Harmon and his attorneys for comment were not successful.