Benjamin Lawsky says the servicers should not charge homeowners for Baum’s misconduct

The New York State Department of Financial Services said borrowers should not pay for  Baum law firm’s misconduct when hiring new counsel in the cases previously handled by the closed law company.

Steven J. Baum first announced in November he will sign a settlement agreement with the Justice Department over fraudulent foreclosure practices, and that it agreed to pay the $2 million fine. A couple of days later, the news that Baum is closing the company came as a surprise, because the settlement imposed the law firm to change its foreclosure process too under official supervision. However, Freddie Mac and Fannie Mae already removed Steven J. Baum’s law firm from their list of approved counsel, although this company handled more than 40% of all New York foreclosure cases and most of the two GSE’s foreclosure cases.

A month after Baum announced it is winding down the firm, Benjamin Lawsky, Financial Services Superintendent sent a letter to servicers saying they should not charge borrowers with any penalties, costs, accrued interest or any fees.

Lawsky’s letter comes after servicers began their hunt for new counsel, as Baum closes its company. This means that about 40% of the existing foreclosure cases will need new counsel, which means new costs while days are passing and the penalties are on.

New York already leads the country with its longest foreclosure timeline, as foreclosures take an average 900 days to go through the foreclosure pipeline. Based on this information, RealtyTrac made some calculations according to their estimation, the foreclosure backlog needs seven years to clear through the present court system.

When the robo-signing scandal surfaced last fall, Lippman implement a new rule for foreclosure attorneys to push the possibility of robo-signing back to zero: now they have to sign an affidavit, for the accuracy of the records in a foreclosure.