Ex-Foreclosure King's Orphaned Cases Clog Courts, Cause Chaos, Lead To Defective Public Sales

In West Palm Beach, Florida, The Palm Beach Post reports:

• Nearly four months after the collapse of the Law Offices of David J. Stern, orphaned foreclosure cases still clutter the courts, causing auction uncertainty and more work for an already overwhelmed system.

• Between Jan. 1 and Feb. 17, 74 homes were sold to the highest bidder during Palm Beach County's daily online foreclosure auctions with no one representing the bank. All but three of the cases were at some point handled by Stern's office, which lost a substantial amount of its foreclosure work in the fall following allegations that cases were mishandled.

• Many of the auctioned homes were also sold without the required advertising. By law, the auction must be advertised once a week for two consecutive weeks. With the firing of the Fort Lauderdale-based law firm Ben-Ezra & Katz this month by mortgage giant Fannie Mae, more cases may go astray. "The possibility is there," said Palm Beach County Clerk of Court Sharon Bock, whose office oversees the county's auction system.

• In auctions where the banks are not represented, it's usually an investor who places the winning bid. They may believe they're getting a great deal because the homes often sell for a fraction of the foreclosure judgment.

• On Jan. 5, a Jupiter home with a $817,969 judgment against it, and valued by the Palm Beach County Property Appraiser at $337,603, was sold to an investor for $30,400. But more often than not, the buyer finds out that the sale wasn't advertised properly and the clerk can't issue a certificate of sale. In the Jupiter case, the court docket shows no proof of publication filed before the sale.

• When that happens, the buyer has to petition the court to set aside the sale, which goes to a hearing, and then the clerk issues a refund. Bock estimates it takes one hour to handle each case where a refund must be issued. With 74 cases already this year, that's nearly two weeks of work for a full-time employee.

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• It's not always the investor who loses out. On Jan. 5, a Lake Worth home with a $125,437 judgment against it was bought by an investor for $30,200. The bank asked the court to vacate the sale because it wasn't represented at auction and "the third party bid of $30,200 is grossly inadequate in light of the final judgment amount."

• The judge denied the request, allowing the investor to keep the home. "If anyone has a bone to pick, it would be the plaintiffs," Bock said about the auction problems.

For more, see Foreclosed homes from collapsed law firm still clogging Palm Beach County courts.