Steven J. Baum P.C., one of New York's largest default services law firms and the subject of a recent federal investigation into its foreclosure processes, will close, the firm confirmed Monday. It is the second large default services firm to cease foreclosure operations in the wake of last fall's robo-signing scandal and the investigations it spawned. The closure notice came as Fannie Mae sent out a directive Monday that servicers are authorized to transfer Fannie Mae foreclosure or bankruptcy matters from the Baum firm to any other retained attorney network firm in New York. In March, the Law Offices of David J. Stern in Plantation, Fla., one of the largest foreclosure firms in the nation, ceased foreclosure work. The Baum firm also filed a Worker Adjustment and Retraining Notification, or WARN notice, with state, county and municipal labor agencies of an impending mass layoff. "Simultaneous to the filing, employees at the law firm also were provided notification about the layoffs, Steven Baum said in an emailed statement provided to the media. "We will fulfill all of our obligations under WARN and during this process we will also fulfill our remaining work on behalf of our clients,” he said. “Disrupting the livelihoods of so many dedicated and hardworking people is extremely painful, but the loss of so much business left us no choice but to file these notices.” The firm employs about 67 employees at its Amherst, N.Y., office and about 22 in Long Island. Over the past two weeks, Fannie Mae and Freddie Mac both quit referring new cases to the firm. Bloomberg reported Bank of America (BAC) and Ally Financial Inc. (GJM) also stopped using the firm. Like the Stern firm, Baum's rapid downfall commenced with the initiation of investigations into its practices and the subsequent decisions by Fannie and Freddie to quit sending new referrals. Last month, the firm agreed to pay the Department of Justice $2 million and change its practices to resolve a probe of faulty foreclosure filings. The agreement between the Baum firm and DOJ resolves an investigation over 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. It didn't constitute a finding of unlawful practice or wrongdoing, the U.S. attorney's office said. In April, Attorney General Eric Schneiderman subpoenaed the firm. At the time, Baum said he was cooperating fully with Schneiderman's investigation. In a public relations disaster, a New York Times column reported late October that the Baum firm held a Halloween party last year during which employees dressed as foreclosed-upon homeowners. The action further damaged the firm's standing. This spring, New York Attorney General Eric Schneiderman began an investigation of the firm. At the time, the Baum firm said it was cooperating fully. The firm said through an outside communications firm that it would not be granting any interviews or commenting further. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.