Lending Servicing

EXCLUSIVE: Butler & Hosch buys default assets from Morris Schneider Wittstadt

MSW at center of embezzlement scandal

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The Atlanta-based law firm of Morris Schneider Wittstadt agreed to sell its default assets to Butler & Hosch, the two firms confirmed exclusively to HousingWire.

The transfer of default assets between Morris Schneider Wittstadt and Butler & Hosch was made official and took effect on Jan. 30. Under the agreement, the transfer of default assets is effective immediately but the client transition may take up to 60 days, the firms said. Financial terms of the deal were not disclosed.

The firms said that the agreement will create “one of the largest national operation platforms for the U.S. residential default mortgage servicing industry.”

During the transition period, a dedicated MSW and compliance team will continue to manage the remaining client files until they are transferred to the new platform. In order to “ensure continuity of direct services and support to clients,” a group of attorneys and professionals previously employed by MSW will join Butler & Hosch immediately.

“Over the past few years, consumer focused policies and government led regulations have set a new standard for the mortgage industry and for law firms that support the mortgage servicing industry,” Butler & Hosch said in a statement.

“The shift has created the need for more focus on internal operations, government compliance and risk management both financial and reputational,” the firm continued. “This agreement will enable Butler & Hosch to accelerate stronger risk, audit, operational and technology solutions for clients.”

Butler & Hosch Senior Partner and CEO Bob Hosch said that the purchase agreement is a positive step forward for the firm. “This asset purchase marks a new chapter and gives the firm a more competitive operational platform to service our clients,” Hosch said.

As part of the agreement, Kenneth Daniel, who was MSW’s chief operations officer of default operations and customer management, will join Butler & Hosch as chief operating officer, effective immediately.

“MSW has provided default legal related services to a wide variety of clients for over twenty years,” Daniel said. “Throughout this time the firm grew and expanded services to adapt to the changing mortgage industry environment. Our decision to become a part of B&H was the next logical step for us in this journey.”

MSW’s sale of default assets marks the second time less than six months that it has sold of a piece of its business, which also includes the ownership of a title company, LandCastle Title.

In August, Fidelity National Financial (FNF) acquired a 70% stake in LandCastle Title after “substantial escrow account misappropriations” were discovered within LandCastle’s parent company, the law firm of Morris Hardwick Schneider, which was subsequently renamed Morris Schneider Wittstadt after the firm’s former managing partner, Nathan (Nat) Hardwick resigned.

According to a letter posted to the joint website for LandCastle and Morris Hardwick Schneider, the acquisition was “precipitated by a significant shortage in the accounts of MHS and LandCastle, of which Fidelity became informed by the partners of MHS.”

That letter stated that Hardwick had resigned his positions as managing partner of MHS and the chairman of the board and CEO of LandCastle Title.

The following day, HousingWire reported that Hardwick’s former firm and his former partners were suing him, alleging that Hardwick embezzled at least $30 million from the companies’ accounts, accusing Hardwick of using the money to pay for private jets, cover real estate investment losses, cover millions in gambling debts and other investments.

Since then, the situation surrounding the escrow account shortages discovered at LandCastle Title and Morris Schneider Wittstadt continued to become more complicated, to the point where the tangled web ensnared to PGA golfer Dustin Johnson, who sued the firm’s managing partners for stealing $3 million from him to cover shortages in the firm’s accounts allegedly created by Hardwick.

In the wake of those allegations, legal grenades have been lobbed from all sides. The Wittstadts fired back at Johnson’s claims in an attempt to get Johnson’s lawsuit dismissed, saying that Johnson’s lawsuit was without merit, devoid of facts, “patently false” and a “travesty to legal pleading.”

Johnson answered back, leveling blockbuster claims against the Wittstadt brothers, specifically that the Wittstadts conspired to use Hardwick as a pawn and set him up to take the fall for the shortages.

And the Wittstadts answered those claims by calling Johnson’s lawsuit a work of fiction “worthy of John le Carre,” and a “laughable fairy tale.”

In their amended motion to dismiss, the Wittstadts said that Johnson’s reversal from initially calling Hardwick a “racketeer” to later referring to Hardwick as a pawn raises “serious questions” about Johnson’s judgment.

“Dustin Johnson’s first wild theory, that his friend Nat Hardwick conspired with the Wittstadt Defendants to steal $3 million, was so ludicrous that he abandoned it,” the Wittstadts said in their latest motion to dismiss.

“Johnson’s new yarn, that he and his friend are patsies in a complex, serpentine fraud scheme, would be even more laughable but for the damage that such patently false allegations cause to the reputations of good lawyers who are, without any question, the true victims here.”

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