Fannie and Freddie tell mortgage servicers not to refer new cases to Baum firm
[Update 1: Adds confirmation that Fannie suspended new referrals to Baum firm] Fannie Mae said Tuesday that it told mortgage servicers to stop referring new foreclosure cases to the Steven J. Baum PC law firm. Last week, Freddie Mac told mortgage servicers they may no longer refer New York foreclosure or bankruptcy cases to the Baum firm. Both government-sponsored enterprises had used Baum as part of their attorney networks. The Freddie directive became effective Nov. 10, according to a short statement on the Freddie Mac website. A Fannie Mae spokeswoman said Fannie is in the process of updating its designated counsel list, but confirmed that no new cases will be going to Baum. It's another blow for the large, Buffalo, N.Y.-based foreclosure law firm, which last month agreed to pay a $2 million fine and change its foreclosure processes under a settlement with Department of Justice. The DOJ describes the Baum firm, which also has an office on Long Island, as one of the largest mortgage foreclosure firms in New York state. In a story in the Buffalo News on Tuesday, Freddie Mac spokesman Brad German acknowledged that Baum was "a big firm" for Freddie Mac business. Baum wasn't immediately available for comment. Whether large servicers will follow Freddie's lead and pull new cases from the firm was unclear Tuesday. Last year, when the Law Offices David J. Stern in Plantation, Fla., lost its business from the government-sponsored enterprises, the nation's largest mortgage servicers quickly followed suit. The firm essentially imploded within six months, dropping from about 1,000 employees to just a handful today who are mainly there to wind down the business and assist in processing documents for more than 20 lawsuits Stern filed against his former mortgage clients. In New York, the agreement between the Baum firm and DOJ resolves an investigation into Baum's foreclosure-related practices, specifically whether the firm, on behalf of its lender clients, filed misleading pleadings, affidavits and mortgage assignments in state and federal courts in New York, the U.S. attorney's office said. The agreement "does not constitute a finding by any court or agency that Baum has engaged in any unlawful practice or wrongdoing," the U.S. attorney said in a statement."Baum acknowledges, however, that it occasionally made inadvertent errors in its legal filings in state and federal court, which it attributes to human error in light of the high volume of mortgage defaults and foreclosures throughout the state of New York in the wake of the national subprime mortgage crisis." In April, Attorney General Eric Schneiderman subpoenaed the firm. At the time, Baum said he was cooperating fully with Schneiderman's investigation. Public opinion turned against the firm in recent weeks when photos of a Halloween party at the firm surfaced on the Internet showing employees dressed up and mocking homeless people. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.