Freddie Mac bans Baum from N.Y. loan service

By Jonathan D. Epstein
NEWS BUSINESS REPORTER

Updated: November 15, 2011, 8:00 AM

National mortgage servicing giant Freddie Mac has barred its loan servicers from referring any new foreclosure or bankruptcy cases in New York State to Steven J. Baum PC, delivering a severe blow to a firm that depends on such work.

According to a new bulletin posted on the Freddie Mac website on Thursday, effective “on or after” Nov. 10, the Amherst-based law firm is no longer an approved option for the many mortgage lenders that work with Freddie Mac.

Those lenders and servicing firms, which collect loan payments and otherwise administer loans owned or controlled by Freddie Mac, have long used Baum more than any other firm in New York state. So its removal from the list of “designated counsel and trustees” could mark a major hit.

Freddie Mac spokesman Brad Germain confirmed the decision, but declined to elaborate on the reasons. He acknowledged that Baum was “a big firm” for Freddie Mac business.

Consumer advocates and opposing attorneys, who have denounced the firm’s practices, were pleased by the decision. Some also cited the example of David Stern, a Florida law firm with a similar operation to Baum’s that was essentially driven out of business by such controversy.

“We have a lot of the banks who are trying to rectify a negative image,” said Rebecca Case Grammatico, an attorney at the Empire Justice Center in Rochester. “And right now, Steven Baum’s name is bringing additional unwanted negative publicity to banks. So everybody is just trying to stay clear of any bad press in the future.”

Representatives of Fannie Mae, Freddie’s larger competitor in the industry, could not be reached to comment about whether they will also ban the Baum firm. Together, Fannie and Freddie dominate the industry, so their actions and policies are influential.

“Certainly, Freddie is a significant player in the market, and I’m sure it’s going to have an impact,” Grammatico said. “It’ll be interesting to see how the repercussions hit.”

Baum currently handles 40 percent of all mortgage foreclosure work statewide, from Long Island to Buffalo, and has been particularly active downstate, where the mortgage and foreclosure crises have been much more severe than in upstate and Western New York. Instead, Freddie Mac’s servicers must now turn to one of five firms on its approved list, including Fein Such & Crane LLP in Rochester, Rosicki Rosicki & Associates PC in Plainview and smaller firms in Garden City, New Rochelle and Carle
Place. “Regardless of the complaints against the firm, the national problem of foreclosures has not been resolved successfully by government,”

Steven Baum said in a statement emailed on Monday. “Whether it is our firm, another firm in New York State or anywhere else across the country who handles default related matters, the root cause of foreclosures is not attorneys.”

Baum has been under heavy fire around the state, and even nationwide, for the firm’s role in mortgage foreclosures and the “robo-signing” controversy. He and his firm have been castigated not only by consumers and consumer advocates, but also by other attorneys and even some judges, who have criticized the firm’s paperwork as sloppy and riddled with errors.

The firm agreed to pay a $2 million fine in a settlement with the U.S. Attorney’s office in Manhattan a few weeks ago, but is still under investigation by the New York Attorney General’s office, which has issued subpoenas for information to the firm and anyone associated with it. Jennifer Givner, spokeswoman for Attorney General Eric Schneiderman, said the office would not comment.

Baum has also been the subject of class-action lawsuits, and is now under investigation by Rep. Elijah Cummings, D-Md., and the U.S. House Committee on Oversight and Government Reform and its ranking member, Rep. Elijah Cummings, D-Md.

Most recently, it’s been denounced for making fun of foreclosure victims, after photos emerged from the firm’s Halloween party last year, showing staff dressed up in costumes as debtors and, in one case, mocking a New York City attorney. The attorney, Susan Chana Lask, sued the firm in 2010 on behalf of a client, and then fought off a defamation suit from Baum.

“This looks like the beginning of a well-deserved end for Baum,” Lask said.

Meanwhile, local demonstrators want to turn up the heat on Baum. Occupy Buffalo is taking its show on the road Tuesday to Baum’s Amherst offices.The protest movement that has been holding court in a virtual tent city on Niagara Square in downtown Buffalo said it will bring its vigil to Baum’s doorstep, demanding accountability from the law firm and an investigation into the firm’s practices.

The group plans to demand that Baum write and publish a letter of apology in The Buffalo News, send a letter of apology to all foreclosure victims in 2010 and 2011, and impose a moratorium on all foreclosures, according to a press release announcing its plans. It’s also calling on the New York State Bar Association, the trade group and standards-setting organization for attorneys, to conduct a “full investigation” into Baum. The protest will be held at 4 p.m. on Tuesday. Organizers are arranging a car pool for the 15 to 20 demonstrators that are expected to participate in the sidewalk protest on Sweet Home Road, near Baum’s Northpointe Parkway office. “Stephen Baum’s unscrupulous business practices have caused unnecessary homelessness,” the group said in its release.