BAUM WEIGHS IN AFTER UPROAR
JOE NOCERA | NYT NEWS SERVICE
Mr Nocera — You have destroyed everything and everyone related to Steven J. Baum PC. It took 40 years to build this firm and three weeks to tear down.” Thus began a lengthy e-mail that I received, on Thursday evening, from Steven J. Baum, the owner of his eponymous law firm, the largest “foreclosure mill” in New York State. Foreclosure mills, of course, are firms that represent banks and servicers trying to foreclose on the millions of homeowners who have defaulted since the housing bubble burst.
Baum was referring to a column I had written in late October after a former employee had sent me some photographs of the firm’s 2010 Halloween party. They showed employees wearing costumes that mocked people who had lost their homes; the exemployee who forwarded the pictures had described them as “appalling.” A lot of people agreed.
Representative Elijah Cummings, a Maryland Democrat, wrote the firm a letter demanding documents and records. In New York, the attorney general’s office ratcheted up its investigation of the firm; I heard that investigators were looking for more photographs of Baum Halloween parties.
Occupy Buffalo protesters picketed Baum’s offices in nearby Amherst, NY. And, not least, Fannie Mae and Freddie Mac, which own or guarantee half the country’s mortgages, issued new rules forbidding servicers of their mortgages from using Steven J. Baum.
None of which was why I had contacted Baum’s press spokesman earlier this week. What had caught my eye was an article in The Buffalo News headlined, “Foreclosure law firm is battling rule on accuracy.” The article described a court hearing a few weeks ago during which the Baum firm asked the judge to reject — as unconstitutional! — a year-old rule that foreclosure lawyers must attest to the validity of the mortgage documents held by their bank and servicer clients. You would think that any lawyer worth his salt would be happy to affirm that his client was using valid documents to toss someone out of a house. But not, apparently, Steven J. Baum.
In fact, this case matters a lot more than a creepy Halloween party. In October 2010, reacting to the robo-signing scandal, the judge overseeing the New York State court system had issued an order commanding that lawyers representing banks and servicers sign a document “affirming” that their clients had reviewed the accuracy of the documents and records — and that the documents were, indeed, accurate.
Almost immediately, the number of foreclosures in New York dropped dramatically. Why? Because Baum and most of the other foreclosure mill firms wouldn’t sign the affirmation. As time went on, a pattern emerged. Banks and servicers would file a notice of foreclosure. But the next step, which required the affirmation, would never happen, so that case would remain in limbo — and the homeowner would stay in the home.
If you think this is somehow a good thing, think again. For starters, it makes a mess of the court system, which is clogged with foreclosure cases. More pressing for homeowners, New York law gives them a right to a mediation session to see if their mortgage can be modified. But that only takes place once the litigation ensues.
The failure of the lawyers to sign the affirmation means that no mediation can take place.
Meanwhile, fees and interest continue to accrue. “By the time the homeowner gets to a negotiating session, there can be a huge amount of additional debt,” said Yolande Nicholson, the president of the newly formed New York State Foreclosure Defense Bar. “It makes a modification impossible.” When I first asked Baum’s media representative about the case, he sent back a statement claiming that the firm had signed an affirmation in 4,500 cases. When I pressed him, he lowered his estimate to 3,000 affirmations. Most of the foreclosure defense lawyers I spoke to, though, think that even the latter number is wildly exaggerated.
“We looked through a couple thousand filings and found less than a dozen affirmations by Baum,” said Adam Cohen of MFY Legal Services, which has filed a class-action suit against the firm.
The spokesman also told me that it was the client — a servicing arm of HFC Beneficial — that had pushed to have the affirmation ruled unconstitutional and that Baum was just carrying out orders. But when Baum e-mailed me himself, he made no such claim. Instead, he said that the order to affirm was difficult to carry out because servicers were so overwhelmed — “and they wish to do it right.” In a second email, he added that the order was overly confusing. He said nothing about it being unconstitutional — even though that’s the argument he made in court.
“There is blood on your hands for this one, Joe,” he wrote at the end of that second e-mail. “I will never, ever forgive you for this.” I think that’s what they call shooting the messenger.