News 5 Investigates

Aug 6, 2014 9:45 PM by Eric Ross

News 5 Investigates: Colorado AG sues two foreclosure law firms for fraud

Attorney General John Suthers is suing two of the largest foreclosure law firms in Colorado.

Suthers alleges both firms ran a massive fraud scheme, inflating foreclosure fees and making off with an estimated $97 million.

Castle Law Group and Aronowitz & Mecklenburg law firm are the two firms named in the lawsuit.

Aronowitz & Mecklenburg agreed to settle the case for $10 million, while Castle Law Group plans to fight the lawsuit in court.

Foreclosure rates in Colorado hit an all time high 5 years ago.

A foreclosure rate chart with data dating back to 1985 can be found here:

Average Number of Foreclosures Per Month.pdf

Foreclosures peaked in our region around 2008 when the price of homes dropped," Brent Hawker with Action Team Realty said.

In 2009, on average, more than 450 homes were foreclosed upon every single month.

Every time a foreclosure happens, the lender hires an attorney to handle the case.

"There were multiple law firms who specialized in that and became very wealthy," Hawker said.

Not all law firms were following the law.

According to the attorney general's lawsuit, the two firms inflated the cost of fees associated with foreclosures, overcharging banks and the homeowners who were trying to save their houses by as much as $650.

The two firms foreclosed on more than 150,000 homes in Colorado since 2006, potentially making off with nearly $100 million in illegitimate profits.

"There's many times when individuals see an opportunity and take advantage of that opportunity," Hawker said. "Then they (a firm) will find out that opportunity is so good that they take advantage of it to the point where it hurts everyone involved."

Since 2010, the attorney general's office says the two firms inflated fees in more than 13,000 cases in El Paso and Pueblo counties.

Some of those foreclosures, may not have been necessary. It's also possible some homeowners may not have been informed about all the options available to them.

"One of the things they (a homeowner) can do is if they have good income, but have fallen behind on a payment, they can ask for a loan modification," Hawker explained. "They can also ask for a forbearance where the actual payment is put on the back end of the loan."

Other options can be found here:

Foreclosure Alternatives.pdf

"The important thing to remember for the homeowner is that help is free," Hawker said. "They do not have to pay or should not pre-pay anyone for help."

The attorney general's lawsuit came following a two-year investigation.

We're told it could be a lengthy court case for Castle Law Group.

Meanwhile, the Aronowitz & Mecklenburg law firm says although they settled the case, they did not admit any guilt and are still allowed to practice law.

Both complaints can be found here: 

Aronowitz Complaint.pdf

Castle Complaint.pdf

 

 

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