If you work with distressed homeowners, specifically in the state of Florida, you’ve probably stumbled across the name David Stern at one time or another. As the chief house "repo" man in the sunshine state, he’s been dubbed Florida’s Godfather of Foreclosures.
Up until a few months ago, he was the envy of all of his friends, racking up HUGE profits as he cranked out thousands of foreclosures a year. Mr. Stern was living like the sultan of Brunei, with multi-million dollar homes, 7-figure sports cars, and a trophy wife to boot. He also loved to spend time funnin’ and sunnin’ on his massive yacht, affectionately named, “Misunderstood”
Misunderstood? Not so much. A big jerk who got rich by shady and underhanded, if not outright fraudulent means? Yes.
Those that were close to Stern said he was often caught bragging about taking mortgages from the "cradle to the grave." And when speaking about the federal government's disastrous homeowner relief plan, which was supposed to keep people from getting evicted, he joked: "Fortunately, it's failing."
But he’s guilty of far worse than just arrogance and bad taste. The Florida attorney general's economic crimes division is investigating three law firms, including Stern's, over allegations that they created fraudulent legal documents, gouged homeowners with inflated fees, steered business to companies they owned and filed foreclosures without proving the bank actually had a legal interest in the loan. According to employee testimony, Stern's lackeys churned out bogus mortgage assignments, faked signatures, falsified notarizations and foreclosed on people without verifying their identities, the amounts they owed, or who owned their loans.
But there’s a much bigger issue at play here, and it really has nothing to do with David Stern. Though Mr. Stern was a big baller in his own little world, in the grand scheme of things, he’s really small potatoes. Stern only handled about 20% of the foreclosures in Florida, and while that certainly made him the biggest shark in the sunshine state, there were plenty of other players in the world of mortgage evictions. The bigger question is, how in the world did Fannie Mae (a government sponsored enterprise) get so cozy with this crook, who had a rap sheet as big as his ego?
In fact, it was in 1998 that Fannie Mae named Stern to its exclusive attorney network, and he was immediately named “Attorney of the Year”. In that same year he was named in a class-action lawsuit alleging that he padded fees on foreclosed homeowners. Stern settled the case for $2.2 million. According to legal testimony from a Fannie Mae official at that time, Fannie was warned before about troubles at the Stern law firm. But Fannie not only continued referring cases to Stern, but named him Attorney of the Year AGAIN in 1999.
By this time Stern’s fellow attorneys, as well many as homeowner activists, had started warning lenders, federal regulators and the Florida Bar about Stern. In 2002, the Florida Supreme Court reprimanded Stern for submitting "potentially misleading" fee affidavits. But, with the full faith and continued business of Fannie Mae and friends, none of the accusations and court settlements stalled the firm's continued growth.
On July 20, 2010, two investors filed a securities-fraud class action suit alleging that Stern knowingly misled them by failing to disclose the problems within DJSP, a new business he had started just months earlier. Later in July, Florida attorney Kenneth Trent filed a federal lawsuit against Stern's firm under a statute normally reserved for gangsters. Days later, the Florida attorney general launched an investigation against Stern's firm and three other foreclosure mills. Then, in September, amidst all these accusations of fraud, David Stern suddenly dropped out of sight. And yet, after after all of that, it took until October 22, 2010 - after nearly every megabank had withdrawn their cases from Stern’s firm - that Fannie Mae FINALLY fired him.
So, the interesting question remains… were the officials at Fannie Mae that bad at judging character, or did they just not care? Did they fail to do their due diligence on Mr. Stern and his sordid past, or were his previous indiscretions just overlooked because he did a good job at foreclosing on homeowners?
As for Stern, the payment on his $12 million line of credit with Bank of America is late & so is the rent on his headquarters, so it looks like sweet justice may be singing her tune. And if federal and state prosecutors file criminal charges, he could end up in prison, which means the “foreclosure King” might just end up being some fellow jailmate’s lifelong Queen. Sweet dreams, Mr. Stern.
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