Two Pennsylvania cases, one state and one federal, have exposed new types of document problems in foreclosure cases. One of the cases has potentially transformative consequences for thousands of troubled Pennsylvania homeowners. At the center of each is the same law firm: Goldbeck McCafferty & McKeever (GMM).

A lawsuit filed by Patrick Loughren against GMM details how the firm allowed -- and perhaps still allows -- nonlawyers in its firm to file and prosecute thousands of foreclosures.

As long as a lawyer supervises foreclosure filings, and at least reads them before they're submitted to the court, that is acceptable. But Loughren is suing because all three named partners of GMM, Joseph Goldbeck, Gary McCafferty and Michael McKeever, have admitted under oath -- during depositions last September and in a separate case in December 2009 -- that no attorney ever read the filings. The partners made clear that the practice has gone on for the past several years.

Far-Reaching Consequences


Loughren declined to talk with DailyFinance (nor would he even give us the complaint, which is electronically available from the court), and as of now, GMM hasn't returned our calls either. (We learned of the case from Walter Roche's story in the Pittsburgh Tribune-Review.) But Loughren's complaint is so detailed, and the partners' admissions so damning, that if this case is decided on the merits, it's hard to see how Loughren could lose.

If Loughren does win, the consequences could be far-reaching: All current foreclosure actions filed by GMM could be dismissed on the grounds that lawsuits filed by nonlawyers are a "nullity," meaning they don't count. That's hundreds, potentially thousands, of cases across Pennsylvania.

All completed foreclosures that were brought using this method could also be called into question for the same reason, and given that the practice has been going on for years, a Loughren win could throw into question the title to thousands of Pennsylvania properties. In addition, any homeowners who paid legal fees to the banks and GMM during their foreclosures could get that money back.

Bank of America Knew

Loughren notes that in both cases involving the partners' testimony about the practice, Bank of America (BAC) was the foreclosing bank. It was actually present during the December 2009 trial when the admissions were first made. Loughren points out that BofA's representative at that trial, John Smith, is himself a lawyer, and so presumably understood the legal significance of GMM's admission.

Other BofA employees surely learned about the practice too, given that the December case was an effort by the U.S. Bankruptcy Trustee to sanction both the bank and GMM for misconduct, and evidence submitted for it showed the involvement of "high-ranking" BofA people not normally involved in a foreclosure, such as its assistant general counsel.

Although the practice of having nonlawyers file suit wasn't at issue in that case, learning of it upset U.S. Bankruptcy Court Judge Thomas Agresti so much he wrote in his Oct. 5, 2010 order:
"During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the "signature" of an attorney appears on the document. . . . Even though these actions are not being filed in this Court. . .concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM."
Return of "Legal" Fees

In a related Nov. 24, 2010 order, the judge noted that although two of GMM's clients temporarily suspended working with the law firm, Bank of America did not. Even though the bank learned that GMM's practices could be jeopardizing many of its foreclosures, the bank continued to work with the firm and pocket related foreclosure fees, at least as of Nov. 24. (In addition, BofA was aware of more misconduct at issue in the Hill case -- discussed below.)

When asked for comment, a BofA spokesperson said: "We are evaluating our relationship [with GMM]. Beyond that we have no comment."

Loughren is seeking two major remedies. First, he wants GMM to return to homeowners all the fees they paid for work performed by nonlawyers. (Foreclosures, no matter how they are resolved, almost always require that the homeowner pay the bank's legal fees.) That could be a huge amount of money because each homeowner would have paid hundreds or even thousands of dollars.

Second, Loughren wants an injunction preventing GMM from continuing to operate this way. In an interesting twist, Loughren apparently doesn't want fees for himself. He's filed the case "pro se," which doesn't allow for recouping attorney's fees.

Just a Matter of Time

By bringing his suit in this form, however, Loughren has a difficult challenge to prove he has the right -- or "standing" -- to sue GMM. So GMM may escape the suit without a judge ruling on its merits. That won't actually help the firm too much, though, because the suit provides a template for any attorney representing a homeowner being foreclosed on by a GMM client. And since this could include hundreds or thousands of people, surely someone else will take a similar approach if Loughren is found to lack standing.

What misconduct was at issue in the case Judge Agresti oversaw? He found that GMM and Countrywide/BofA "had not been honest with this Court" because they tried to foreclose on Pennsylvania homeowner Sharon Hill, even though she was current on her mortgage. They did so by relying on documents -- specifically "payment change letters" -- they knew weren't real. As first reported by Roche in the Pittsburgh Tribune-Review article, Agresti issued the sanction of humiliation for all the involved parties, by detailing the misconduct in his orders and making the orders public.

While Hill was in a bankruptcy -- which she ultimately completed successfully -- Countrywide changed the amount that Hill owed per month three times, but it neglected to tell her, her attorney or the bankruptcy court of the changes. Hill and the bankruptcy trustee making payments on her behalf made every payment to Countrywide that they believed was due, but the mortgage lender said she was falling behind. When the bankruptcy was discharged, Countrywide lost the right to claim the "overdue" amounts. Countrywide nonetheless tried to foreclose on Hill for them.

To stop the foreclosure, Hill reopened her bankruptcy. For that proceeding, a low-level Countrywide employee generated from scratch three "payment change letters" dated 2003, 2004 and 2007 that purportedly showed Hill's attorney had been told the monthly payment was increased. The most recent letter was dated roughly six month before it was in fact created.

Those letters were part of the evidence submitted to the court, and even after both Countrywide and Countrywide attorneys at GMM were aware the letters were not real, no one informed Hill, her attorney or the Court. The documents were exposed to Hill only because the 2003 letter was supposedly sent to her attorneys at their present address, even though they had had a different one at the time. When you hear that everyone being foreclosed on is really a deadbeat, keep Hill in mind.

Given the massive volume of foreclosures nationally, and their concentration among a few law firms in each area that are disparagingly nicknamed "foreclosure mills," what are the chances that only GMM has this business model?

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you old fart

AS WE ALL KNOW YOU MUST GET A ELECTRICIAN TO REPLACE A LIGHT BULB!!

December 05 2010 at 7:18 AM Report abuse +1 rate up rate down Reply
Wayne

To all of you who are calling people in foreclosure dead beats are either of no mind, Banksters, Lawyers for Banksters or just obnoxious idiots. In either case, if you only knew of the Whole Picture you would not even think about taking the side of the banks. Even the investors are pissed off should tell you something is seriously wrong. Just read about the attorney from Tennessee who paid off his second mortgage and the bank could not give him his note back paid in full. I have worked all my life, seriously, from delivering newspapers to selling X-mass cards at the age of 8. Anything to make a penny. Started working full time at the age of 14 (lied about my age)and to this day when I get my Social Security Report it shows when I started paying income tax and social security. I am still working to this day. When I took a 15,000 dollar pay cut and gas prices went to 4 dollars a gallon and my ARMS adjusted to 300 dollars more then what I was paying originally, I asked for a modification to help me out. This was just before Obama took office and all the talk about the government helping the banks and Obama was asking the banks to help the homeowner. When Countrywide said I could receive one and all the paperwork was sent in ... I never ever got a call from Countrywide at all. When Countrywide held my check for a month and a half and I had to beg them to post it, I wanted to know who owned my Note so I could talk with them personally. Countrywide would not tell me, they said they were under contract not to tell. I did not know about MERS at this time. When I called Countrywide up when the check was posted I asked them "What do you want me to do now" and the lady's reply was "we want you to make another payment, but let me a sure you that this is not guaranteed". Now when I first called them that time they gave me a balance which left out my payment but they told me it was in a special account and not applied to the principle, but put in a special account. So when she said it was not guaranteed I asked her what that meant. She told me "it means we could foreclose on you". This was the first time I heard that and I was confused at first. So I asked her "You mean you want me to make another payment and your not going to apply it to the principle and yet you could still foreclose on me" she said "YES". I then told her "NO reasonable person would agree to that term". How about I not pay you and you get on and modify my loan. This was on the 5th month of the modification which was only going to take 3 months according to Countrywide. So since that time I have not paid Countrywide nor have I paid Bank of America. I have investigated my loan and Deed of Trust. Absolutely nothing was recorded from my original lender to Countrywide. Nothing. BofA, after hounding them for months I finally got them to tell me my Note went to MERS. I checked with MERS and again NOTHING was Recorded. If I knew what I know know I would have never paid Countrywide for the 3 years I was with them. Every person should have the right to talk with his lender and the person who is holding the Note. In my Case ... No One can tell me who is holding my Note. By Law the only person you are required to pay is the one who is holding your Note. That Law has been in effect for Centuries. I am also a Viet Nam Vet and I would like someone to call me a Dead Beat to my Face. They tried screwing me and it backfired. If Countrywide would have given me a 4% fixed interest, which was promised me by my original lender, I would have been still paying on this loan which is about 90 thousand dollars under water. I would never have complained and I would have never had known about MERS, Mortgage Pools, Who owns my Note, Assignments, Recorded Deed of Trust, or any of the other 50 other things I have learned along the way. I would never have know how to file a complaint with the State and Federal agencies. Hell I never ever heard about the Federal Comptroller of Currency untill I filed a complaint. When I tell the Lawyers I have refused to make a payment untill I find out who owns my loan they tell me they wouldn't either. Again those who think I am a dead beat, just make your payments to me. If your not making payments, let me send you a bill and you just pay me anyway. OK !

December 05 2010 at 1:23 AM Report abuse +1 rate up rate down Reply
ddan8719

The fact they make no payments on there mortgage seems overlooked..none..deadbeats most..the more you don't take responsability for your action the more you are rewarded...unemployment is a good example some of these deadbeats have drawn for two years or more and then whine and cry when it comes time to stop that payment..We need a cmplete collasp in this nation.. desperately..looking forward to it..

December 04 2010 at 7:55 PM Report abuse -2 rate up rate down Reply
1 reply to ddan8719's comment
Wayne

You my dear typist ddan: Have no idea what you are talking about. Do me a favor and never ever enter a debate with someone who knows what is actually going on, because your going to look like the stupid, ignorant, and arrogant person you appear to be when writing this post.

December 05 2010 at 1:33 AM Report abuse +1 rate up rate down Reply
cacevedomu

The Standing of the Attorney can be on the basis that the practice allows non-attorneys to practice law in detriment of those who are legally authorize to do so. The practice gave a certain firm an unfair advantage over tohers while competing for the business from the banks.

December 04 2010 at 7:54 PM Report abuse rate up rate down Reply
flyingfortresb17

It is time for the federal courts, the FBI (feeble Bunch of Idiots) and state and local officials to take charge and prosecute these people not only on a civil basis but on a criminal basis, find them guilty and throw away the keys for the rest of their natural lives as well as the lives of their children and grandchildren. Death is too easy for them.

December 04 2010 at 7:45 PM Report abuse +1 rate up rate down Reply
Joe

I own my house with no bank or mortgade hanging over me but do I worry- hell yes! Because banks are not the only crooks out there. There is our own goverment which can raise my property taxes, take my house for some stupid goverment project, or some idiot who gets a scratch and sues me, or I get injured or laided off and can't pay my taxes. So next time you scream deadbeat homeowners think about the reasons I give for worrying- it could happen to you.

December 04 2010 at 7:39 PM Report abuse +2 rate up rate down Reply
Gg

LOL - Entertainment only.

December 04 2010 at 6:35 PM Report abuse +1 rate up rate down Reply
rjen164497

Come on. Foreclosures are about deadbeats that bought something they could not afford or just wanted something for nothing. Backdoor Barney Frank made it possible for people to get morgages they should never have qualified for. Now the Government is trying to blame the ones they forced to take on these deadbeats. The Freaken Congressmen should be sued for NOT READING the healthcare bill they signed off on.

December 04 2010 at 6:20 PM Report abuse -4 rate up rate down Reply
2 replies to rjen164497's comment
kqrscott

Wonder if your statements would remain the same if you lost your job or ability to work. Not everyone in foreclosure purchased to much house. Judge not, for you too shall be judged!

December 04 2010 at 7:17 PM Report abuse +2 rate up rate down Reply
flyingfortresb17

Foreclosures are about people Like Abramoff, ENRON types and Greedy Banks and loan managers who want an easy way to strip money from the middle class. Worry about Al Franken and AN Barney (the purple dinasour) Franks on another blog.

December 04 2010 at 7:50 PM Report abuse +1 rate up rate down Reply
Fred

They are Goverment protected, nothing will become of this, like always.

December 04 2010 at 6:06 PM Report abuse -1 rate up rate down Reply
MrMajestyk

All Chase is good for is chasing you from your home!!!!!!!!!!!!, bunch of dumb *****.

December 04 2010 at 5:28 PM Report abuse +6 rate up rate down Reply