Colorado Attorney General John Suthers‘ investigation into law firms allegedly overbilling for foreclosure filings — or billing for filings they never made — likely will turn into a national story, according to a Cato Institute fellow and national bloggers who are following the case.
The Denver Post has published a series of articles on the local investigation this summer, citing court documents on Suthers’ and other investigations.
“National mortgage and banking bloggers have taken the view that these practices are not just in Colorado,” said Walter Olson, Cato Institute fellow. “Colorado just happens to be the first place where the attorney general has launched an investigation. Underneath it all is a pattern you can easily see being replicated in other states.”
Carolyn Tyler, spokeswoman for Suthers, wouldn’t comment on the case because the investigation is ongoing.
According to Paul Jackson, publisher and CEO at HousingWire, similar probes into foreclosure billing practices have begun on the East Coast, although subpoenas have not yet been issued.
Those investigations focus on how law firms billed for “allowable costs” in conjunction with foreclosures on loans insured or guaranteed by government-sponsored enterprises (GSEs) Fannie Mae, Freddie Mac or the Federal Housing Administration, Jackson wrote in the HousingWire.com REwired blog on Aug. 14.
“It turns out that many of the major law firms responsible for managing foreclosures for the GSEs also have a controlling interest in the ancillary service firms that generate the variable fees that appear as ‘costs’ on the lawyer’s bill. Many law firms either outright own, or their partners have a significant interest in, the company that is posting and publishing notices; or they may own or have an interest in the company that manages process of service, as well,” Jackson said.
Because federal dollars are involved, the Obama administration or Congress may get involved, Olson said.