Inside Foreclosure King David Stern’s Downfall

— By Andy Kroll

| Thu Nov. 4, 2010 2:40 PM PDT
— A caricature of David J. Stern, portrayed as Superman, from a t-shirt he gave to investors.

After years of high-flying success and millions of dollars in profits, the future suddenly looks grim for the Law Offices of David J. Stern. The firm, which was the subject of a long MoJo investigation published in August, used to be one of the nation’s most powerful “foreclosure mills,” those assembly line-like operations that handle hundreds of thousands of foreclosure cases for the nation’s largest mortgage companies. (In 2009 alone, the Stern firm handled 70,382 foreclosure cases.) But in the past few months, the corner-cutting and alleged fraud in the foreclosure business, as described in my August story, erupted into a national scandal. As a result, the Stern firm has seen its fortunes plummet, with major clients, like Fannie Mae, Freddie Mac, and Citigroup, cutting ties to Stern. Stern’s operation has also laid off hundreds of employees in recent weeks.

Until now, though, the full extent of the decline of Stern’s operation—which includes his law firm and publicly-traded real estate processing company, DJSP Enterprises—has been somewhat unclear. But according to a pair of letters obtained by Mother Jones, Stern says he plans to shed about 70 percent of his workforce. Last winter, his operation employed nearly 1,000 employees, which means 650 to 700 staffers in all could face termination. (An official with DJSP Enterprises didn’t immediately respond to a request for comment on Thursday.) Even more staggering is this statistic: In the last six months, Stern writes in one of the internal letters, his outfit has lost more than 90 percent of new business referrals. “While we are doing everything possible to guide the company successfully through these difficult times, these developments mandate that we take immediate action to align the business with current realities,” reads one of the letters, with Stern’s name listed as author. The letters, a source close to DJSP Enterprises says, were sent on Thursday to employees throughout the company; one is a termination letter, the other a letter informing recipients that they remained employed by DJSP.

29 Responses

  1. why is it that i don’t hear floods of news regarding foreclosures and what the attorney general is going to do about all those crooks. people run around the world for many causes care to join me on a stop stop foreclosure run!! if banks would work with the homeowners that would bring solutions and give the the American families their dignity back!!!!!!!!!!!!!!!!!!!

  2. we need to make more noise air out the dirty laundry make a march and demand justice

  3. why is it that i dont hear floods of news regarding foreclosures and what the attorney general is going to do about all thoswe crooks!

  4. Thanks for the response concerned. The Tetrus blocks are falling fast and furious.

  5. Frankielee,

    Likewise with the timing of the assignment. Also, in mine, they filed the assignment DURING the BK. That is NOT the time to be doing any such filing.

    I have been advised to get an adversarial filing put in with the BK court. It would then lead to a hearing.

    In the meanwhile, I have an extended stay but the last I checked, there is a sale date set that Quality (and Litton) need to reschedule.

  6. In the bankruptcy context, a “Creditor” is an entity that had a Claim against Debtor before the case was filed. 11 U.S.C. § 101(10). A “Claim” is a right to payment. § 101(5). Only a Creditor may file a Proof of Claim. § 501(a).

    The entity coming after me is out of sync with assignment. Therefore, I’m guessing that they’ve screwed the pooch. My thought is to let them file, then go after them for false foreclosure. Am I missing anything?

  7. Not only do the group of Fannie/Freddie ‘troops’ that were making those treks to check on the progress with Sterm’s operation need to be investigated, there is also the source within Fannie/Freddie that was contacting the Sterm operation to forewarn of each visit.

    Now, not every visit would be done as a ‘surprise’ visit, but most contact from any government entity is set up in writing, not via some confidential phone call.

  8. Kahane & Associates need to be looked at by Fla. Atty General. LPS used there???

  9. The Federal Gov’t through FNMA is foreclosing our homes through fraud.

    STATE MORATORIUMS BY EXECUTIVE ORDERS NOW.

  10. Isn’t Bernie Madoff looking for a roommate? He has an ad on Craigs List.

    All of these employees should be hangin’ out with Bernie, trading war stories, while their own houses are foreclosing; except the ones that want to quickly and fully rat out their masters.

  11. Apparently the McCalla-Rymer law firm in Georgia have secured a contract to perform foreclosures for companies that belong to us the tax payers, Fannie and Freddie even though there is evidence that this firm may have been robo signing and lying in their foreclosure filings as well.

    Dear Fannie and Freddie, instead of continuing business as usual and patronizing all this tainted law firms, which make you and all your employees look like leaches and thieves, you should be generating a get to know your borrowers program and get to deal directly with them. Get rid of all the corrupt and criminal lawyers and servicers and sit down face to face with your borrowers and make reasonable deals.

    By doing this instead of foreclosing on your “owners”, you will do more to help America bounce back than any QE the federal reserve is attempting to do.

  12. Is Juan Valdez going to be a credible witness for his job as the only employee for MERS? We all have different names acting as MERS employees. This poor man is at 29%? Wow, somone should help him.

  13. So who is going to hire one of these former employees, to spill the beans about what really went on inside that place.

  14. Why are’nt they going after the banks that hired Stern to do the dirty work?

    http://www.huffingtonpost.com/2010/11/06/us-banks-failing-at-faste_n_779941.html

    If they got TARP MONEY and they dont have the money to give back to the investors and the chain of title is broken?

    Maybe they sold the same loan multiple times?

    Food for thought.

  15. Someone needs 2 c what’s going on with Chana Taub, this woman is being so abused by the courts its scary that judges & lawyers can actually be bought off. the media needs 2 publicize the truth not lies that her husband feeds them. They speak 2 him print his lies & say she could not be reached 4 comment that is the biggest load of bs I’ve ever heard. This woman can not only be reached she can actually back up her story with p
    roof. She just filed a rico case and is suing @ least 5 judges 3 of whom are federal judges. The jewish community liaison in the kcda’s office & a multitude of other corrupt individuals.

  16. We should get the unemployment list ,some may be able to tell more horror stories about this STAR .

  17. Fighter,

    Yep that is a very strange assignment. Also, what does the notary stamp show as far as the end-date for the notary commission?

    In most states, the commission period is 4 years. When you look at the stamp used on the document, you may see that the notary stamp was not valid in the year the document protrays. Also, I beleive you may find that the notary was not even licensed in 2005, let alone tryng to use their current stamp. You may have to check with the state that licensed them to find out if they even had a license back in 2005.
    ————
    Now to contrast your situation with other companies such as Litton Loan Service and McCalla-Rhymer. Litton is right ‘in there’ with generating fraudulent assignments.

    Judges have already let it be known that they see no reason for any Pool to be taking on a DEFAULTED loan. I don’t know if the judges also took note of the CLOSED status of the pool (if the pool even exists).

    The only assignment recorded was generated in July 2010. The trust for the pool was set up in September 2005. It had to close within 90 days of opening.. So it would have closed as of December 2005.

    This assignment is only 4.5 YEARS too LATE.

  18. I wonder how many properties may have been acquired by Stern insiders.

    And what if his firm(s) go bankrupt?

    IF that should happen, I presume that some of the employees may have also received properties, not just a new car every year. Obviously, with some employees having all their bills paid directly by the firm, some of those payments (or the items purchased) can also be clawed-back potentially. Some of them may not even have a foreclosure to fight, just an eviction. But even then, those insiders will likely have protected much of their ill-gotten gains.

    Only the minions at David Sterns’ will end up at risk of being homeless.

    Other than companies that are intending to commit fraud and don’t mind a connection to a firm so mired in the headlines for fraud, are likely to hire any of these people.

  19. STERN fraduelent Assignment FIling;

    If the Pooling and Service Agreement was established September 2005, HOW can an assignment to that MBO happen in June 2005?

    Am i Right?

    You can not have an Assignment to a PSA, before the established date right?

    So if Sterns Assignement states it was assigned in June 2005 and the PSA was not born until September 2005- Stern LIED right?

  20. And lets not forget folk’s Fannie Mae made him rich with tax payer money… could there be kick-backs that need to be investigated here… ya know all those troops that Fannie sent down to look things over and found not one thing wrong? Time to get a full list of names of employees that Fannie Mae sent to Stern’s HQ to look things over… perhaps one of the “terminated” employees would like to speak up???

  21. I would be very surprised if the bulk of the $140 million that Stern took from the third-party “investors” that bought the stock in his Mill is not already off-shore, where it cannot be touched by whatever Receiver ends up appointed to salvage assets. Remember: in the Bernie Madoff case, the Receiver spent $27 Million in billed legal fees to recover only $850,000.

    Stern bought a nine-figure mega-yacht, with oceanic capabilities. Is it gone? Is he gone? Venezuela and Brazil have no extradition treaties with the US. Would you stick around and go to jail? Hardly likely for a sly cookie like Stern.

  22. Now that the former employees of Stern’s outfit are unemployed, in no time flat they will be defaulting on their own mortgages. It will be very interesting to see the defenses that they now raise.

  23. The bastard knew this all along. He is laughing right this minute. There is no question that his assets have long since been protected from the claims of creditors as he embarks on his exit strategy.

    He is no better than a thief, plain and simple.

  24. The whole group of firms that used LPS or McCalla-Rymer needs to be investigated.

    I’m suspecting that all the firms that are doing any part of the foreclosure processing need to be on the list of firms that get investigated.

    The only exceptions to the presumption should be loans that were never securitized. Loans held by local banks or credit unions, that are STILL held by them are far more likely to be valid loans and valid foreclosures.

  25. I don’t think things are going exactly how Stern expected them to go…..

    Nonetheless, Stern has gone out of his way to assure investors that foreclosures would surge in the second half of 2010 as clients processed their backlogs of delinquent loans. In March, he and his chief financial officer flew to Southern California to make the case for why the foreclosure industry is ripe for expansion. The setting was the annual shindig of investment banking firm Roth Capital Partners, a swank conference for hedge-fund managers and institutional investors held at the Ritz-Carlton, Laguna Niguel, a luxury hotel perched on a bluff overlooking the Pacific Ocean. Conference perks included private concerts by Social Distortion and Billy Idol].

    In his speech to the money people, Stern explained why the time was right to invest. Historical data, he said, showed that people will continue losing their homes in large numbers through 2012, ensuring plenty of business. The market’s shadow inventory—people in default whose homes have not yet gone into foreclosure—numbered between 5 and 7 million. And when those foreclosures go through the pipeline, the properties will need to be sold. Which is to say, the near future looks golden for David Stern. “When people say, ‘Oh, my god, the economy is bad,’ I’m like, ‘Oh, my god, it’s great.’ I hate to hear people are losing homes, and credit isn’t available, and people’s credit is such that they can’t [refinance],” he told his audience. “But if you are in our niche, it’s what we want to do, and it’s what we want to see.”

    Then there’s this:

    The company’s stock took a nosedive in May, after Stern told investors there would be lower earnings due to a slowdown in referrals by a big client and to the Treasury Department’s renewed efforts to bolster homeowner relief. Some of DJSP’s investors, angry over the decline in their investment, claimed Stern knowingly misled them. In July, DJSP, Stern, and his CFO were hit with a class-action securities fraud suit. More investors have since alleged fraud by DJSP, pushing the company’s share price down to $3.70 as of August 3.

    Yesterday the stock closed at 77 cents. It couldn’t happen to a more deserving guy. Payback’s a bitch!

  26. Forclouser Mill in Mass known as Harmon Law owned by Mark P Harmon was on the board of directors of a David Sterns operation DJSP till end of October when he “resigned” And Harmon Law is under investgation by Mass AG for wrongful evictions here in mass. Harmon Law needs to be boarded up.

  27. By the way, where is David J. Stern? I think I read on this blog that his boat (very large ocean-going) is missing from its mooring near one of his homes in Florida. I know that Brazil has no extradition treaty with the US. Perhaps, Mr. Stern is now permanently on the lam.
    http://www.challengingforeclosure.com
    Sirak@challengingforeclosure.com

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