[Updates story with Stern e-mail] DJSP Enterprises (DJSP), whose major client is the Law Offices of David J. Stern, laid off more than 400 employees Thursday, or about 70% of its work force, in the wake of Freddie Mac's and Fannie Mae’s decision to quit using the firm. DJSP is the publicly traded subsidiary of Stern’s law office. It handles the nonlegal foreclosure processing duties of the law practice. The 416-employee layoff pushes total staff reductions to more than 700, according to a news release Friday from the company. "Dear Employee ... ()()()() () The Miami Herald estimated the layoff at 560 people What once was one of the nation’s largest foreclosure processing firms, and the largest in Florida, has rapidly diminished in size. The operation, which at one time had more than 1,000 employees, has come under intense scrutiny in recent months for alleged improprieties over the handling of foreclosure cases. Earlier this week, Freddie Mac pulled all existing cases from the Plantation, Fla.-based firm, after a decision two weeks prior to discontinue new referrals. Fannie Mae and Citigroup also suspended use of the firm in late October. The law firm and three others are under investigation by Florida Attorney General Bill McCollum for alleged improprieties in their foreclosure work such as filing affidavits without review or proper notarization in what has become known as robo-signing. Also under investigation are the Law Office of Marshall C. Watson in Fort Lauderdale, Shapiro & Fishman in Boca Raton, and the Florida Default Law Group in Tampa. At the office park where Stern's operations are located, eyewitnesses saw groups of employees leaving Thursday, some hugging and kissing, apparently saying goodbye, according to a story in Friday’s Miami Herald. It was "heartbreaking," one bystander said. Employees there who remained with the company declined comment, with one remarking: "Oh, no, I want to keep my job," according to the Herald article On Oct. 27, DJSP's accounting firm, McGladrey & Pullen, resigned. On Tuesday, DJSP named Jewett, Schwartz, Wolfe & Associates as its new accounting firm. Management changes have included a resignation of the COO, the CFO and the firm’s general counsel, as well as a board member. In addition, Stern stepped down last month as chairman of the board, according to SEC filings. The firm also has operations in Louisville, Ky., San Juan, Puerto Rico; and Manila, the Philippines. It was not clear whether they were affected by the layoffs. DJSP was trading at less than $1 on Friday. Stocks that trade at less than $1 over an extended period of time risk delisting from NASDAQ. Write to Kerry Curry.