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Highlights:
- Colorado AG John Suthers is investigating a law firm for foreclosure fees.
- Suthers subpoenas Vaden Law Firm.
- D. Rico Munn says Suthers using ?magic words? to make case.
Colorado Attorney General John Suthers is investigating the Denver-based Vaden Law Firm for possibly ?engaging in deceptive conduct,? by possibly committing fraud against distressed homeowners by overcharging for foreclosure services it provides.
Suthers filed a 12-page motion in Denver District Court in late April, seeking to force Vaden to comply with a subpoena it issued last December for more information on its investigation.
Colorado Attorney General John Suthers
At issue is whether the firm is ripping off distressed homeowners and investors buying foreclosures or is Suthers invoking ?certain magic words,? in what are typical attorney-client relationships.
Suthers said Vaden might have violated the Colorado Consumer Protection Act by ?making false or misleading statements about the cost of its services or otherwise engaging in deceptive conduct prohibited by the CCPA.?
For example, Vaden charges $150 for posting a notice of a Rule 120 hearing on the door of a homeowner in foreclosure ?by hiring a family member or independent contractors,? while the going market rate of the postings is about $25, according to Suther?s court filing. A Rule 120 hearing is when a judge review and approves a public auction of a foreclosed home.
In many cases, Vaden?s clients are mortgage servicers, but Suthers argued the ?foreclosure billing practice is unique,? in that its fees in many cases are ultimately paid by ?homeowners, prospective purchasers, investors and taxpayers.?
Many mortgage servicers are reimbursed when the foreclosed homes mortgages were backed by Fannie Mae and Freddie Mac, so in many cases costs charged by Vaden are ?borne by taxpayers through government-backed mortgages,? according to the motion.
The Attorney General ?has a public interest to ensure that the fees and costs are not misleading or deceptive,? according to the civil action.
The subpoena seeks information about the amount of compensation to the firm?s family members and independent contractors who post the notices.
Postings that were intended to help homeowners were turned into a ?profit mechanism for the firm at the expense of homeowners, investors, prospective purchasers, and taxpayers,? according to the filings
Other examples of Vaden charging too much, according to Suthers:
- Vaden charges $300 for a court and Lexis/Nexis filing for a Rule 120 action, which typically costs $200 or less.
- It charges a $60 technology fee, while it is billed $40.
- A mailing cost of $25, regardless of the actual cost or number of mailings.
- A $30 ?document fee, regardless of whether such a cost is necessary or actually incurred.
However, in an 18-page response filed on May 22, Vaden?s attorney, D. Rico Munn, said the Attorney General?s office has overstepped its authority and does not have the right to subpoena the records it is seeking.
?The Attorney General appears to believe it has nearly limitless power to invade the confidences that serve the foundation of any attorney-client relationship by merely invoking certain magic words or inflammatory allegations,? according to the response by Munn, an attorney with Baker & Hostetler. (Munn this summer will be leaving the law firm to become the superintendent of the Aurora Public Schools.)
D. Rico Munn.
Munn, in his response, said the Attorney General is incorrect that the foreclosure billing process is unique because the costs are ultimately borne by third parties. That occurs in many contexts, such as insurance tripartite relationships, corporate indemnity agreements, fee and cost shifting agreements in contracts, ?and even where the Attorney General represents members of government,? Munn argued.
?Without any legal basis, the Attorney General argues that an attorney can incur liability under the Colorado Consumer Protection Act for statements made of a client in a contested proceeding?Ultimately, the Attorney General has failed to state a claim under the Colorado Consumer Protection Act and thus, the subpoena is nothing more than a naked attempt to invade the core of an attorney-client relationship.? Munn called Suther?s described the subpoena request as a ?staggering overreach of authority.?
Vaden, he said, like any other law firm, negotiates with its clients regarding compensation for fees and costs. ?The amount the attorney charges is strictly a matter of contract between it and its clients.?
Munn noted the firm does not have any interest in the foreclosed properties and is paid by the clients. It is immaterial, he argue, whether the lender uses proceeds from a foreclosure sale or redemption to pay the Vaden Law Firm.
Have a story idea or real estate tip? Contact John Rebchook at? JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.
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Related Posts:>Source: http://insiderealestatenews.com/2013/05/suthers-investigating-law-firm-over-foreclosure-fees/
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