EXCLUSIVE: Freddie Mac settles with David J. Stern law firm
The now defunct Law Offices of David J. Stern recently entered into a settlement agreement with Freddie Mac, ending a two-year legal battle between the foreclosure firm and the government-sponsored enterprise over outstanding fees.
Freddie Mac first took issue with the Stern firm in late 2010 when they and major mortgage servicers quickly dumped the firm in the midst of an attorney's general investigation into foreclosure practices at several Florida default services firms and a scandal over the robo-signing of foreclosure affidavits.
The settlement leaves somewhat of a dark cloud over the GSEs since they and major servicing shops have taken the opportunity to quietly settle with the Stern firm, making it unclear whether Fannie and Freddie – and servicing shops – actually paid out money to settle litigation with a law firm that became synonymous with the default servicing scandals that plagued the state a few years ago.
In the original complaint, the foreclosure law firm accused Freddie of ‘breach of contract’ on the grounds that the GSE owed the Stern firm $1.34 million in unpaid legal and service fees for handling default work.
A settlement agreement that effectively ended this case was filed in the U.S. District Court for the Southern District of Florida this month.
The agreement does not disclose specific details nor discuss whether a financial settlement was reached between Freddie Mac and David Stern. In other words, it’s unknown if Freddie paid any money to settle the case with Stern and neither party is disclosing details.
Freddie Mac declined to comment when asked about the case and settlement.
Jeffrey Tew, an attorney with Tew Cardenas and counsel for David J. Stern, told HousingWire he could not discuss terms of the agreement, but said, "there is no admission by either party of wrongdoing." Yet, he admitted being pleased with the results.
He added, "it was a very routine case of a law firm doing work for a client where there was a dispute … and the parties have reached an agreement on the matter."
Yet, the Freddie Mac case is not isolated and involves one of the most controversial Florida default law firms to emerge during the robo-signing crisis that emerged in the Southeast state in 2010-2011.
Tew previously settled a similar case over legal fees that the Stern law firm filed against Fannie Mae.
Back in 2011, HousingWire first reported that Tew on behalf of the David J. Stern firm filed 25 lawsuits against major servicers, including Bank of America (BAC), Citigroup (C) and Aurora Loan Services. Many of those cases have since settled, although the Aurora and Bank of America cases remain open, according to Tew.
A source tells HousingWire the Citigroup case is now basically settled, with terms much more favorable for the big bank. The source said the successful template Citigroup used in the case may be repeated in future litigation.
The Stern firm alleged that the servicers – along with the GSEs – owed his business millions of dollars in fees. Stern claimed BofA, and its servicing arm BAC Home Loans Servicing, alone owed a combination of $10.7 million in fees for legal work.
Jacob Gaffney contributed to this report.